Credit Suisse Group AG’s credit rating was cut three levels and Morgan Stanley’s was reduced by two as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms.
Credit Suisse was cut to A2, the same as JPMorgan Chase & Co. and BNP Paribas SA, as Moody’s completed a review of global banks with capital-markets operations it announced in February. Morgan Stanley and Zurich-based UBS AG, the other firms singled out for three-level reductions, were lowered two steps instead, the ratings firm said yesterday in a statement.
“Right now there are a lot of internal bank policies that if you’re doing a longer-term structured derivative, you want the counterparty to be A-rated or above,” said David Konrad, an analyst at KBW Inc. in New York. Because Moody’s is downgrading the entire banking industry rather than one or two firms, “a lot of those policies may be rewritten over time.”
Moody’s wrote on Jan. 19 that credit profiles of global lenders are weakening as governments struggle with their finances, and economic uncertainty and higher funding costs persist. When Moody’s places a company’s ratings on review for a downgrade, it typically decides whether to cut them within three months.
“If you look at every single credit metric there is for Goldman Sachs and frankly for many of our competitors, none of the actions they’ve talked about are warranted,” Viniar told analysts and investors April 17 after the New York-based company reported first-quarter results. “We are, as you know, we’re quite analytical. And when we do all of the analysis, we cannot figure out why they are where they are.”