Moody’s downgrades 15 banks
22 June 2012 New York
Image: Shutterstock
A long wait for Moody’s predicted downgrade of 15 banks came late on the 21 June, after the US markets shut.
But the downgrades did not seem to have a great effect, with the global economy and manufacturing output in China remaining the major worries.
German, French and Italian markets were all down, with the main index down 55 points, and China recorded an eighth consecutive drop in manufacturing output.
After chief executive James Gorman lobbied hard to avoid a three-notch downgrade of Morgan Stanley that the rating agency had threatened, its long-term credit rating was cut from "A2" to "Baa1", three notches above “junk”.
HSBC expected a two-notch downgrade but received just one, sending shares down 0.5p to 559p. Barclays was down two notches, and Lloyds was down one, with shares up 0.05p at 31.25p.
RBS was down 1.6p to 242p after its one notch downgrade, which the bank disagreed with.
It stated: "The group disagrees with Moody's ratings change which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile. Nonetheless, the group believes the impacts of this downgrade are manageable, bearing in mind its £153 billion liquidity portfolio.”
An industry expert said that the downgrades could limit banks’ activities, as they will have to increase the collateral in their transactions with each other. The expert added that the downgrades are a constraint on capital and business.
But the downgrades did not seem to have a great effect, with the global economy and manufacturing output in China remaining the major worries.
German, French and Italian markets were all down, with the main index down 55 points, and China recorded an eighth consecutive drop in manufacturing output.
After chief executive James Gorman lobbied hard to avoid a three-notch downgrade of Morgan Stanley that the rating agency had threatened, its long-term credit rating was cut from "A2" to "Baa1", three notches above “junk”.
HSBC expected a two-notch downgrade but received just one, sending shares down 0.5p to 559p. Barclays was down two notches, and Lloyds was down one, with shares up 0.05p at 31.25p.
RBS was down 1.6p to 242p after its one notch downgrade, which the bank disagreed with.
It stated: "The group disagrees with Moody's ratings change which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile. Nonetheless, the group believes the impacts of this downgrade are manageable, bearing in mind its £153 billion liquidity portfolio.”
An industry expert said that the downgrades could limit banks’ activities, as they will have to increase the collateral in their transactions with each other. The expert added that the downgrades are a constraint on capital and business.
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