New York, NY, United States (4E) – Moody’s Investors Service said Thursday that it plans to downgrade four large U.S. banks because of reduced support to them by the government under the financial reforms.
In a statement released Thursday, Moody’s may downgrade JPMorgan Chase & Co., Goldman Sachs Group Inc., Wells Fargo & Co. and Morgan Stanley. Moody’s said that Citigroup Inc. and Bank of America Corp. are both under review with uncertain rating change direction, while State Street Corp. and Bank of New York Mellon Corp. were already under review.
The ratings agency said it was looking at the impact of the government’s financial reform that was brought about by the financial crisis of 2008.
Both Moody’s and Standard & Poor’s believe downgrades may be necessary given the new tools by the government that will wind down banks instead of bailing them out with taxpayer money. Among the policies the government is considering is forcing bondholders to take losses or convert debt holdings to equity. The new plan may also impact the ratings of the banks’ deposit-taking subsidiaries.
Moody’s has assigned JPMorgan and Wells Fargo a rating of A2, Goldman Sachs a rating of A3 and Morgan Stanley a rating of Baa1, according to Bloomberg News data. Citigroup and Bank of America received a Baa2 grade from the ratings company.