Barclays, Credit Suisse, Deutsche Bank Ratings Cut by S&P

Barclays, Deutsche Bank and Credit Suisse Group AG had their credit ratings lowered by Standard & Poor’s as new rules and “uncertain market conditions” threaten their business.

Long-term counterparty credit ratings for the three banks were cut to A from A+, S&P said yesterday in a statement. The company also affirmed its A long-term rating and A-1 short-term rating on UBS AG, according to the statement. The outlook for all four companies is stable.

Banks are still in recovery from the 2008 financial crisis, which drove some economies into recession and spawned new regulations and legal probes. The four European lenders are among the most exposed to proposed rules that could reduce revenue from trading and investment banking operations, the ratings firm said.

“We consider that these banks’ debtholders face heightened credit risk owing to the industry’s tighter regulation, fragile global markets, stagnant European economies and rising litigation risk stemming from the financial crisis,” S&P said. “A large number of global regulatory initiatives are increasingly demanding for capital market operations.” Read more >>

Moody’s Issues Capital Warning to Global Banks - May Downgrade 17 Banks

Moody’s has warned that the tendency of global banks to avoid new capital requirement rules and load up on debt will continue to put pressure on their creditworthiness.

The credit rating agency announced it was placing 17 banks on review for a downgrade earlier this year, citing “vulnerabilities” in the companies’ vast and volatile capital markets businesses. The potential downgrades have become a talking point on Wall Street, with some bankers openly criticizing Moody’s and others privately attempting to change the agency’s mind in closed-door meetings.

But in an interview with the Financial Times, Moody’s banking analysts said the agency was updating its financial ratings to take into account the historical tendency of banks to leverage their balance sheets and arbitrage global financial rules, often to the detriment of the banks’ own health and the safety of the wider banking system. Moody’s caution could see all 17 banks downgraded when the review is finally completed, expected to happen in mid-June. More...