Moody’s Investors Service cut its ratings on four of the biggest U.S. banks after deciding the government would be less likely to help them repay creditors in a crisis.
Bloomberg reports that Morgan Stanley, Goldman Sachs, JPMorganChase and Bank of New York had their senior holding company ratings lowered one level Thursday after Moody’s concluded a review of eight U.S. banks that began in August.
U.S. banking regulators have been preparing rules and procedures that seek to allow the government to wind down even the largest financial companies without providing taxpayer assistance. The plans would require investors to accept losses and could require bonds to be converted into equity capital.
'We believe that U.S. bank regulators have made substantive progress in establishing a credible framework to resolve a large, failing bank', Robert Young, a managing director at Moody’s, said in a statement. 'Rather than relying on public funds to bail out one of these institutions, we expect that bank holding company creditors will be bailed-in and thereby shoulder much of the burden to help recapitalize a failing bank'.
Moody’s affirmed the senior holding company ratings of Bank of America, Citigroup, State Street and Wells Fargo.
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