Moody's cuts credit ratings of world's biggest banks
Morgan Stanley, one of the most closely watched firms in the much anticipated review, had its long-term debt rating lowered by just two notches, one level less than had been expected, sending its stock up sharply in after-hours trading.
The downgrade left Morgan Stanley more highly rated than Bank of America Corp and Citigroup, but a step below Goldman Sachs Group.
Credit Suisse, which last week was warned about weak capital levels by Switzerland's central bank, was the only bank in the group to suffer a three-notch downgrade. But its new A1 deposit and senior debt ratings still rank higher than many of its peers.
All of the banks affected by today's actions 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 the announcement.
Financial markets have been bracing for the downgrades since February, when Moody's Investors Service said it had launched a review of 17 banks with global capital markets operations. These companies faced diminished profitability and growth prospects due to difficult operating conditions, increased regulation and other factors, Moody's said.
The long-term debt ratings cuts could increase funding costs for Morgan Stanley and other banks, and trading partners may ask for more collateral. But the impact could