Moody's threatens 122 banks with credit downgrade

Moody's Investors Service sent shockwaves through the global banking system and sparked fury in the City yesterday as the ratings agency threatened to slash the credit scores of more than 100 banks in the wake of Europe's debt crisis.

The agency has put the ratings of 114 banks in Europe under review, as well as 17 investment banks. The move could hit 122 banks in total as nine of the investment banks are based in Europe.

All four of the UK's big banks – HSBC, Barclays and the state-backed Royal Bank of Scotland and Lloyds – face potential downgrades, affecting their ability to fund themselves in financial markets and potentially hampering an already weak recovery.

Michael Symonds, a bank analyst at Daiwa Capital Markets Europe, said: "The banks are getting it from all sides at the moment – the ratings are only going in one direction. All things being equal, a lower rating will make it more expensive for them to fund themselves and make funding sources scarcer as some bond funds can only hold bonds of a certain rating."

One senior banker said: "This is yet another example of the ratings agencies pandering to the populist mood rather than giving markets and investors anything which is informed, useful or timely."

Moody's assault on the banks came two days after it slashed sovereign ratings on a host of European nations, including putting Britain's AAA credit rating on negative outlook.

The ratings agency blamed "disrupted markets and a deteriorating, uncertain economic outlook" for its bank review but warned that in some countries – such Italy and Spain, whose banks are under the closest scrutiny – doubts over the creditworthiness of governments themselves exacerbated the risks.

Moody's added that investment banks in particular were facing headwinds such as "more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions", which would diminish long-term profits and growth prospects.

Morgan Stanley of the US and two Swiss banks, UBS and Credit Suisse, could be knocked three notches lower on Moody's creditworthiness scale. Goldman Sachs could be downgraded by two notches, the agency said. "Rapidly changing risk positions expose these firms to unexpected losses that can overwhelm the resources of even the largest, most diversified groups," it said.

In December the European Central Bank pumped nearly €500bn (£419bn) into the European financial system, easing the pressure on hundreds of strugglers that took up three-year loans. But the European Banking Authority has also called on the region's banks to bolster their finances by €115bn.

Despite the fury in the City over the cuts, Moody's managing director of European banks, Johannes Wassenberg, denied that the ratings agency was part of the problem, saying it was providing "transparency" to the market. "There is a lot of information assymetry out there between borrowers and lenders, and we are reducing that assymetry."

News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Extras
indybest
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
music
Sport
football
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
News
i100
Arts and Entertainment
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home