Moody’s said the banks “have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities”.

Morgan Stanley and UBS AG, the other firms singled out for sucha steep cut, were lowered two steps instead.

TORONTO – Moody’s Investors Service has cut the credit ratings of 15 of the world’s largest banks, including the Royal Bank (TSX:RY), Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs.

After two notch downgrades, their credit ratings now stand just two levels above junk, a sign of the difficult business conditions they face.

But its new A1 deposit and senior debt ratings still rank higher than many of its peers.

While all three were downgraded, their debt had the highest ratings among the 15 banks affected.

After putting banks on notice months ago, Moody’s Investors Service cut 15 large firms’ ratings, which could do lasting damage to their bottom lines and unsettle the markets.

These companies face diminished profitability and growth prospects due to difficult operating conditions, increased regulation and other factors, Moody’s said.

Citi said it doesn’t believe the downgrade will impact the bank’s funding costs because the ratings actions have already been expected by the market and its business partners have included them in their analyses.

“The biggest surprise is the three notch downgrade of Credit Suisse, which no one was looking for,” said Mark Grant, managing director at Southwest Securities Inc.

“In fact, it was Morgan Stanley that was supposed to be downgraded by that amount and Morgan received only two notches of cuts.”.

David Mathers, Credit Suisse’s chief financial officer, said the firm was pleased that Moody’s continued to recognize it as one of the most highly rated banks in its peer group.

BANKS CHALLENGE RATINGSIn a statement, Morgan Stanley said its ratings “still do not fully reflect the key strategic actions we have taken in recent years,” adding: “With our de risked balance sheet, stable sources of funding, diverse business mix and strong leadership team, we are well positioned to deliver for clients and shareholders.

Citi said it doesn’t believe the downgrade will impact the bank’s funding costs because the ratings actions have already been expected by the market and its business partners have included them in their analyses.

“Citigroup’s statement went beyond defending itself to blasting Moody’s for its treatment of US banks in general, and then to praising institutional investors and the US Congress for showing less respect for the agency.”.

That category crosses a number of classifications in terms of credit ratings, in terms of capital base and in terms of balance sheet,” the bank said in a statement.. The downgrades come at a time of great uncertainty in the global economy. Europe’s currency union is under threat from bad bank loans. The US economy is slowing and the fast growing emerging economies of India, Brazil and China are also cooling. Financial markets have also been volatile.. In June, Moody’s downgraded Spain by three notches after downgrading 16 Spanish lenders in May. It also cut the ratings on seven German and three Austrian lenders in June.. The review followed a move by Moody’s to downgrade Royal Bank to Aa1 from Aaa in December 2010 due to the bank’s capital markets exposure.. The bank said profits were down as business growth in Canadian Banking and Insurance, and stable credit quality were offset by lower earnings in its capital markets operations. Its international and wealth management operations also suffered.. Royal Bank is the country’s largest bank by assets and market capitalization, and has 77,000 employees serving more than 18 million clients.. You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments.
All you need to do is register and/or login and you can join the conversation and give your feedback.. LUXEMBOURG – The head of the International Monetary Fund said Thursday the euro is under “acute stress” and urged leaders …. Moody’s has cut the ratings of 15 of the world’s biggest banks, hours after the markets were digesting the admission by Spain that its banks could need up to €62bn of bailout money to see them through the next three years.

We won`t rate any financial institution higher than the sovereign – this means that the outlook has changed on the (financial) entities as well,” Ananda Bhoumik, senior director at Fitch Ratings told CNBC on Wednesday.. Commercial lenders in India are heavily exposed to sovereign debt as they are required by the central bank to invest 24% of their core deposits in government bonds. A downgrade of India`s credit rating to below investment grade would therefore have a knock on effect for local banks.. “There are two ways a (sovereign) downgrade would impact the banking sector.

They have brought in new people and changed the risk management structure and that is positive.

Moody’s said these banks have either had “problems in risk management or have a history of high volatility,” and some of them have implemented business strategy changes.

We will see how they perform,” Young said.In its announcement, Moody’s acknowledged the lowest ranked banks have been making changes to improve their profits, but said it was taking a wait and see attitude.”.

Rupert Dresser is a business journalist based in Adelaide, Australia. Rupert has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Rupert spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.