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Moody's May Downgrade 17 Banks, Securities Firms


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Moody's May Downgrade 17 Banks, Securities Firms

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Moody's warned on Thursday it may cut the credit ratings of 17 global and 114 European financial institutions in another sign that the impact of the euro zone government debt crisis is spreading throughout the global financial system.
The U.S. rating agency said its action on financial institutions from 16 European nations reflected the impact of the debt crisis and deteriorating creditworthiness of its governments.

It cited more fragile funding conditions, increased regulatory burdens and a tougher economic environment for its review of banks and securities firms with global reach.

Moody's [MCO 41.75 0.23 (+0.55%) ] salvo follows rounds of downgrades in European sovereign ratings as the euro zone's struggle to keep its weakest link Greece afloat has been driving up borrowing costs and straining finances of other nations.
Last Monday, Moody's cut the ratings of six European nations including Italy, Spain and Portugal and warned it could strip France, Britain and Austria of their top-level AAA grade.

Last month, Standard & Poor's cut France's and Austria's top ratings and downgraded seven other euro zone nations. It also cut the euro zone's bailout fund by one notch.

Moody's said it was reviewing the long-term ratings and standalone credit assessments of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Royal Bank of Canada.

Under Review







BAC
9.48

-0.05
-0.52%
121,000,143


C
36.57

0.06
+0.16%
10,817,921


GS
124.49

0.73
+0.59%
2,164,926


JPM
45.76

0.09
+0.2%
10,419,210


MS
19.625

-0.115
-0.58%
8,165,996


RY
58.27

0.16
+0.28%
174,527






The long-term ratings and standalone credit review of European banks includes Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC, Royal Bank of Scotland and Societe Generale.
Moody's said it was also extending the reviews of the long-term ratings and standalone credit assessments of Credit Suisse, Macquarie, Nomura and UBS.

"Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions," Moody's said in a statement.
As a result, the longer-term profitability and growth prospects of the institutions under review had diminished.

In its review of European banks, Moody's said that once it is completed, the ratings will "fully reflect the currently foreseen adverse credit drivers."

European banks' bond holdings of struggling euro zone nations Greece, Portugal, Ireland, Spain and Italy have trapped Europe in a vicious circle.

The falling value of the debt puts pressure on banks, which in turn weighs on lending and economic activity, making it tougher to sustain the growth that governments badly need to shore up their finances.

European Union leaders have been trying to put a financial "firewall" around the most afflicted nations, but jittery market sentiment suffered a fresh setback on Wednesday when several EU sources told Reuters that the euro zone was considering a delay in parts of a second bailout plan for Greece.

Moody's said that for 99 European financial institutions, the standalone credit assessments have been placed on review for downgrade. For 109 institutions, the long-term debt and deposit ratings have been placed on review for downgrade.

For 66 institutions, the short-term ratings have been placed on review for downgrade.
The announcement came shortly after Moody's said it was taking ratings action on 114 financial institutions in 16 European countries to reflect the impact of the continent's debt crisis and the deteriorating creditworthiness of governments in the region.

"Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions," Moody's said in a statement.
"These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer term profitability and growth prospects of these firms, the agency said.

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March 30, 2012


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