Moody's Investors Service on Wednesday said the ratings of U.S. financial services firm Morgan Stanley (MS: Quote) as well as Swiss banking giants UBS AG (UBS: Quote) and Credit Suisse Group AG (CS: Quote) may be lowered by three notches.
The ratings agency said it would review 17 banks and securities firms with global capital markets operations, as it believes these firms face challenges not fully captured in their current ratings.
In a statement, the agency noted that capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions.
"These difficulties, together with inherent vulnerabilities ... have diminished the longer term profitability and growth prospects of these firms," Moody's added.
These inherent vulnerabilities include confidence-sensitivity, interconnectedness, and opacity of risk.
The ratings agency placed under review the long-term ratings and standalone credit assessments of five U.S. financial institutions.
These include Bank of America Corp. (BAC), Citigroup (C ), Goldman Sachs (GS), JPMorgan Chase (JPM) and Morgan Stanley, along with Canada's Royal Bank of Canada. Except for Morgan Stanley, short-term ratings were affirmed on all other four banks.
Goldman Sachs, JPMorgan, Citigroup Inc. and Germany's Deutsche Bank AG (DB) may be downgraded by two levels.
Barclays Plc (BARC.L, BCS), BNP Paribas SA (BNP.L, BNPQY.PK), Credit Agricole SA (ACA, CDA.L, CRARF.PK ), HSBC Holdings Plc (HBC, HSBA.L) also may be reduced by two levels. Bank of America and Societe Generale may be cut by one grade.
Early this week, Moody's downgraded the ratings on six Eurozone countries, including Italy, Spain, Malta, Portugal, Slovakia and Slovenia with a 'negative' outlook.
At that time, the agency mainly cited the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework.
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by RTT Staff Writer
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