Banking Crisis
Moody's Adjusts Ratings On Raft Of International Banking Groups
The global rating agency has reviewed 13 of the world's biggest banking groups.
Moody’s Investors Service has raised and cut the ratings on a
swathe of US, European and other international investment banks
after the organisation examined regulatory changes that are
designed to make it easier for firms to deal with crises.
The changes, which have seen adjustments to ratings of firms
such as Morgan Stanley, HSBC, Credit Suisse and Barclays, are of
significance because investment banks are often providers of
products and services that wealth managers use – and counterparty
risk can be an important factor to watch, as demonstrated by the
2008 financial market crisis.
The following global investment banks were covered by the Moody’s
review: Bank of America, Barclays, BNP
Paribas, Citigroup, Credit Suisse, Deutsche
Bank, Goldman Sachs, HSBC, JP Morgan, Morgan
Stanley, Royal Bank of Scotland, Societe Generale, and
UBS.
Among the changes, Moody’s increased Morgan Stanley’s long-term
issuer rating by two steps and increased by one notch the grades
for three other investment banks’ holding companies.
Holding company grades on Bank of America, Citigroup and Goldman
Sachs rose by one level. Holding company ratings fell on
Barclays, HSBC, Credit Suisse and Royal Bank of Scotland.
“The new methodology includes a number of elements that Moody's
has developed to help accurately predict bank failures and
determine how each creditor class is likely to be treated when a
bank fails and enters resolution. These new elements capture
insights gained from the crisis and the fundamental shift in the
banking industry and its regulation,” the organisation said in a
statement late last week.
Moody's said its rating actions reflected the banks' specific
macro profiles; their core financial ratios; qualitative
adjustments made owing to organisational complexity and any
balance sheet opacity; the protections offered to depositors and
senior creditors in the US, EU and Switzerland as assessed by its
"advanced loss given failure" analysis; and the likelihood
of government support for the operating companies of most of
these banking groups, as well as the low likelihood of such
support for their holding companies.
