Eastward shift in global banking strength indicated in revised ratings
With 15 large US lenders downgraded and Asian banks upgraded or maintained, S&P shows its confidence in Asian banking; Moody’s and Fitch maintain negative outlooks on American banks. December 05, 2011 | Timothy ShimMore than a year ago, Standard & Poor’s (S&P) warned financial institutions that it would be overhauling its ratings system as part of a broad range of initiatives put forward by the ratings agency to repair a reputation damaged by its placement of AAA ratings on securities backed by subprime mortgages. Earlier this month, S&P stated that it would commence the roll-out updated ratings for more than 750 financial institutions globally, starting with the largest. To date, revised ratings have been released for large banks in the US, India, China, and Australia. Ratings on 15 US banks dropped, according to S&P’s revised ratings criteria, including Bank of America Meryll Lynch (BAML), Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, Bank of New York Mellon and Wells Fargo, possibly affecting their short-term funding costs. The move will doubtless do little to overly affect the sentiment of investors who are already on edge about contagion from the current turbulent effects of the European financial, but could cost institutions such as BAML dearly, with its stock already dropping by over 60% this year alone. BAML said in a regulatory filing that “a downgrade of one level would necessitate the posting of $5.1 billion of additional funds.” Australia's four biggest banks were also downgraded, with S&P citing the cost of sourcing cash from overseas money markets, and Australia’s foreign debt as indicators. It is likely that the banks could be downgraded further should the European crisis escalate. The banks themselves however shrugged off the downgrades, with Westpac chief financial officer Phil Coffey saying "we don't expect the rating change to have any impact" on funding costs. One milestone occurring through the series of ratings revisions was the loss of the final AAA bank’s rating, Dutch cooperative bank Rabobank, the last to enjoy the rating as the number of AAA-rated banks dwindled over the year... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, China, Risk and RegulationCapital & Strategic Issues,China,Risk and Regulation, Capital & Strategic Issues,China,Risk and Regulation, Keywords:Moody's, Fitch, Standard & Poor’s, Bank Of China, China Construction Bank, Euro Crisis Moody's, Fitch, Standard & Poor’s, Bank of China, China Construction Bank, Euro Crisis
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