Standard & Poor’s has downgraded the credit ratings of several of the largest banks, including those that provide custody. The ratings were cut after S&P applied its new ratings criteria for banks, which were published on November 9. The ratings review of 37 financial institutions reflects these criteria, which take into account industry shifts and the role of governments and central banks worldwide, said the company.
S&P did not publish its evaluations for each bank but will be hosting two teleconferences today to discuss the application of the newly revised criteria and the related ratings actions.
The ratings of Bank of America (and its main subsidiaries), Citigroup, Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley fell one notch.
Bank of Americas issuer credit rating was cut from A to A-. The downgrade comes amid worry about whether the bank has the capital to withstand a further economic downturn in the US and the wherewithal to cope with the eurozone crisis. It said in a regulatory filing that downgrades could likely have a material adverse effect on the bank’s liquidity, making access to credit markets more difficult.
Bank of America may also be required to put up more capital should the provisions in its derivative contracts be triggered as a result of the downgrade.
The bank made redundancies from its prime brokerage division, reported by Global Custodian this month.
Further downgrades include:Citigroup from A to A-Goldman Sachs from A to A-JPMorgan Chase from A+ to AMorgan Stanley from A to A-Bank of New York Mellon from AA- to A+
Barclays PLC from A+ to A
HSBC Holdings from AA- to A+
RBS from A to A-
Some banks ratings stayed constant, although their outlook was affected and in some cases they were given an outlook negative status. Banks whose ratings stayed unchanged include:
State Street and its subsidiary State Street Bank and Trust at AA-BNP Paribas, including BNP Paribas Securities Services, at AA- (AA-/Stable)ING Groep at A (A/Stable/A-1)Deutsche Bank at A (from A+/Stable/A-1 to A+/Negative/A-1)
(JDC)