Business

Moody's may cut 17 banks' ratings

Moody's in a newspaper
Image caption Banks who receive a downgrade may find their borrowing costs rise

Moody's, the credit rating agency, has warned that it may cut the credit ratings of 17 banks and financial services firms that it is currently reviewing.

Moody's said Morgan Stanley, UBS and Credit Suisse could see their credit ratings cut by up to three notches.

It said the banks' existing credit ratings did not reflect the challenges that they were facing in the market.

Nine of the banks are based in Europe, including Barclays, HSBC and RBS.

Among those facing a two-notch cut are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings, and Goldman Sachs.

Bank of America and Nomura were among those that may be downgraded by one notch.

Banks which receive a downgrade may find their borrowing costs rise, although some analysts have disputed the effect of any downgrade.

Agencies 'slow'

Alexander Potter, banking specialist sales at Berenberg Bank, says the riskiness of these banks has already been reflected in prices for the banking sector on the credit default swap market for some time.

Credit default swaps provide insurance-like protection against the risk of a third-party borrower defaulting on its debts.

"This follows a similar review by S&P and credit spreads highlight the fact the market is already, in most cases, well ahead of the slow-moving ratings agencies," said Mr Potter.

"Their input is obviously unhelpful for headlines, but their real economic relevance is becoming increasingly marginal, we feel."

Moody's also rates the creditworthiness of countries. Earlier in the week, it warned the UK that its credit rating may be cut in future.

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