NEW YORK – Moody's Investors Service has lowered the credit ratings on some of the world's biggest banks, including Citigroup, Bank of America, JPMorgan Chase and Goldman Sachs, reflecting concern over their exposure to the violent swings in global financial markets. The downgrades late Thursday ultimately are a measure of Moody's view on the ability of the banks to repay their debts. The credit rating agency took action on Morgan Stanley, Credit Suisse, Deutsche Bank, UBS, HSBC, Barclays, BNP Paribas, Crédit Agricole, Société Générale, Royal Bank of Canada, and Royal Bank of Scotland. But some analysts feel that Moody's is playing a game of catch-up. The latest actions, say critics, are backward-looking and do not consider the measures that banks have taken to strengthen themselves, including raising capital and getting out of certain risky businesses like proprietary trading. “I feel that Moody's action is five years too late," said Gerard Cassidy, an analyst with RBC Capital Markets. The threat of a downgrade has rippled through the markets for months. After Moody's held out the prospect of a three-notch downgrade for Morgan Stanley in February, the bank's shares dropped by more than 25 percent. Moody's ended up cutting the firm's rating by two levels. Now, bank executives will try to convince their creditors and large customers that Moody's has overreacted. The banks "have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities," Moody's global banking managing director Greg Bauer said in a statement outlining the rational for the downgrades. These banks are all major players in the global stock and bond markets, which have become extremely volatile. Bauer noted though that some of the banks, including JPMorgan Chase and HSBC, have reliable buffers in more stable businesses that could act as "shock absorbers" during a crisis. A downgrade usually means banks will have to pay more for its debt. Investors demand higher interest for riskier debt, which is what the downgrades represent. With interest rates already at rock-bottom levels, the lower ratings may not significantly affect the cost of funding for the banks. – Agencies
