Moody’s slashes ratings of 15 global banks..Dow tanks
The health of 15 of the world’s largest financial institutions has been called into serious question, as Moody’s downgraded their credit ratings, citing exposure to Europe’s economic woes.
Some of the biggest names in banking, including Goldman Sachs, Barclays, Citigroup, Credit Suisse, HSBC and Deutsche Bank, saw their ratings slashed, spelling increased scrutiny from markets and potentially higher borrowing costs.
Among the moves, Moody’s cut JPMorgan’s long-term senior debt to A2 from Aa3 and assigned it a negative outlook negative. It also cut Morgan Stanley’s long-term senior unsecured debt to Baa1 from A2 and also assigned it a negative outlook.
Morgan Stanley had been viewed as the US bank that could suffer the most from a Moody’s downgrade, because of its relatively large trading operation and because of the extent of the cut that Moody’s threatened.
The cost of funding for banks will rise as a consequence of the cuts, said Southwest Securities managing director Mark Grant.
‘‘It will be more difficult to execute complex trades and you will see counterparty risk allocations curbed,’’ he said. ‘‘I wouldn’t by any bank stocks – or any stocks, for that matter, here. I would buy senior debt of banks because spreads are very wide and that represents good opportunity so long as you stay ‘senior’ in the capital structure.
“The biggest surprise is the three-notch downgrade of Credit Suisse, which no one was looking for. In fact, it was Morgan Stanley that was supposed to be downgraded by that amount and Morgan received only two notches of cuts.”
Moody’s announced the review on February 15, saying these global investment banks’ ratings did not capture the evolving challenges of more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult oprating conditions.
In a separate announcement, Moody’s also downgraded British bank Lloyds TBS.
Many of the world’s largest banks have been locked with governments in a downward spiral since the financial crisis of 2008.
Since then banks have seen the value of their assets slump and their access to private capital shrink, forcing governments and central banks to provide capital and liquidity support that strains public purses.
With governments too poor to provide meaningful economic stimulus and consumers unable or unwilling to spend, banks have seen business dry up and investments, such as loans, turn sour.
nothing is fixed..
if anything we are in a worse position than 2009 because all the shots have been fired..QE3 is all that the fed has left and thats not going to do anything except send the dow up 500 points for a week or so..get out of stocks unless you like to short..no banks are safe..none..