Economic Indicators, Stock Market & Investment Reports

6.21.2012

Moody’s Slashed Credit Ratings of Big Banks

Moody’s Investors Service on Thursday slashed the credit ratings of 15 large financial firms. Citigroup and Bank of America, two United States banks that were hit hard in the financial crisis, are now rated only two notches above junk. While Morgan Stanley avoided a worst-case scenario of a three-notch downgrade, its rating slipped by two levels.

The downgrades are a serious blow for the banking industry, which is already dealing with the European sovereign debt crisis, a weak American economy and new regulations.

Moody’s downgrades are part of a broad effort to make its analysis more rigorous. The financial crisis stained the reputation of credit rating agencies. Both companies attached high ratings to mortgage-backed bonds that later suffered big losses in the housing bust.

Before the announcement on Thursday, bank shares continued to fall. Goldman Sachs, Citigroup, Bank of America and Morgan Stanley were all down for the day.

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