New enforcement rules; now for the chop!
Bloomberg reports that Goldman Sachs and JPMorgan are among banks whose debt ratings may be cut by Moody’s Investors Service as it examines whether the U.S. would be less likely to ensure creditors are repaid in a crisis.
Morgan Stanley and Wells Fargo also may be downgraded, Moody’s said yesterday in a report. Citigroup and Bank of America are under review, with the direction of any rating change uncertain, Moody’s said. Bank of New York Mellon and State Street already were under review.
Moody’s and Standard & Poor’s have said downgrades may be needed because the federal government has new tools to wind down banks instead of rescuing them with taxpayer money. Those plans can include forcing debt holders to incur losses or convert stakes to equity. The policies also may have an impact on ratings of the companies’ deposit-taking subsidiaries.
'In the past year, we have seen progress towards establishing a framework to credibly resolve these large systemically important banks,' Robert Young, a Moody’s managing director, said in the report.
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