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Why Global Investment Banks are appropriately positioned at low investment grade
December 4th 2017 (7.04mins)
In this episode of Moody’s bank credit podcast, Ana Arsov, Managing Director for Global Investment Banks (GIBs), and David Fanger, Senior Vice President and lead analyst for several US-based GIBs, discuss Moody’s re-examination of GIB credit drivers, five years after the peer group’s ratings were re-positioned to reflect the volatility and risks inherent in large capital markets operations. Ana and David discuss the underpinnings of the 2012 rating re-positioning. They note that the GIBs’ credit strength is holding up about as Moody’s expected, while pointing out several areas in which the peer group has over-performed, and some where it has underperformed. Ana and David also talk about the improved profitability prospects for GIBs, while also noting some important caveats around capital, earnings stability and regulatory developments​​​​​​​​​​​​​
Global Investment Banks: Peer group continues to exhibit low investment-grade credit strength
In June 2012 we repositioned the ratings of 14 Global Investment Banks (GIBs) to reflect the volatility and risks inherent in large capital markets operations, and a re-examination today shows that their credit strength is holding up about as we expected. We noted in 2012 that the historical long-term failure rate of GIBs was inconsistent with an investment grade Baseline Credit Assessment (BCA).

At the same time, we said that the GIBs' standalone credit profiles would benefit from stronger regulatory capital, liquidity and leverage requirements; enhanced risk management frameworks and more comprehensive stress-testing; and a reorientation toward less volatile businesses. We concluded that these factors reduced the GIBs' long-term probability of failure, supporting a low investment grade (baa) median BCA for the peer group.​