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Global Credit Research - 19 Jan 2012
New York, January 19, 2012 -- Several trends are currently weakening the credit profiles of many rated
banks globally, according to Moody's Investors Service.
These trends include (i) deteriorating sovereign creditworthiness,
particularly in the euro area; (ii) elevated economic uncertainty;
and (iii) elevated funding spreads and reduced market access at a time
when many banks face large debt maturities.
In advanced economies, these factors are expected to lead to many
banks experiencing downward migration of their standalone credit assessments
and their debt and deposit ratings in 2012. In the short-term,
these pressures will primarily affect the ratings of global capital markets
intermediaries (the largest firms trading securities and derivatives)
and, in Europe, other banks exposed to financial market disruption.
Moody's expects to place the ratings of a number of these banks
under review for downgrade during first-quarter 2012, in
order to assess the effect of these trends on bank credit profiles.
Although Moody's also notes positive factors -- such
as the accommodative stance of central banks in advanced countries and
the strengthened regulation designed to make banks safer --
the positive trends are overshadowed by the aforementioned negative credit
factors, in Moody's opinion.
"The expected decline of bank ratings reflects the acceleration
of interrelated pressures on the banking sector since the second half
of 2011," says Moody's Global Banking Managing Director Greg
Bauer. "These pressures most immediately affect global capital
markets intermediaries and European banks." In contrast,
the credit profiles and ratings of banks operating in more stable environments,
and of banks with strong, retail-oriented business and funding
profiles, will be less affected. However, despite some
banks being less affected, Moody's acknowledges that the highly
interconnected financial markets and economies imply elevated uncertainty
for all banks, even those banks that have shown resilience thus
Most European banks are vulnerable to the euro area debt crisis that reflects
eroding investor confidence and a weakening regional economy. Moody's
concerns center on the ability of many European banks to retain the confidence
of investors and counterparties and to fully refinance substantial 2012
term debt maturities. To reflect these challenges in ratings,
Moody's will further emphasize the forward-looking elements
of its bank rating methodology, increasing the weight given to estimates
of bank solvency under anticipated and stressed scenarios, and adjusting
its views on the operating environment, franchise value, risk
positioning and financial fundamentals for vulnerable banks. As
a consequence, the standalone credit assessments and ratings for
many European banks will likely decline.
Global capital markets intermediaries face macroeconomic uncertainty,
low growth and severe market volatility. These factors, combined
with regulatory restrictions and intense revenue pressure add to existing
credit challenges for these firms, such as interconnectedness,
complexity and opacity of risk profiles. As a result, Moody's
expects to lower its standalone credit assessments of many global capital
markets intermediaries, including the standalone credit assessments
of broader-based banking groups with significant capital markets
operations. The long-term -- and in some cases
potentially short-term -- debt and deposit ratings
of these institutions will likely also be affected.
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MD - CCO Financial Institutions
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Gregory W. Bauer
MD - Global Banking
Financial Institutions Group
Moody's: Global bank ratings likely to decline in 2012
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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