Moody`s may downgrade 114 financial institutions
Baku, February 16 (AZERTAC). The International agency Moody`s has put 114 European banks and other financial institutions on downgrade review.
They include 24 financial institutions in Italy, 21 in Spain, 10 in France and 9 in Great Britain. Possible downgrades may also hit 8 financial institution in Austria and Denmark, 7 - in Germany, 6 - in Portugal and the Netherlands, 5 - in Sweden, 4 - in Slovenia and 2 in Switzerland. Some ratings could be cut also in Finland, Norway, Belgium and Luxembourg.
Nine European banks have been put on another list of 17 global financial organizations whose ratings might be slashed in near future. They include such well known banks as Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Commerzbank, British HSBC and Royal Bank of Scotland, French BNP Paribas and Societe Generale.
The move is explained with the escalating debt crisis, which make it more difficult for banks to borrow at low interest rates.
During its review Moody`s will consider the structural vulnerabilities in the business models of global investment banks, which include The confidence-sensitivity of customers and funding counterparties, risk-management and governance challenges, as well as a high degree of interconnectedness and opacity. In addition, rapidly changing risk positions expose these firms to unexpected losses that can overwhelm the resources of even the largest, most diversified groups. Such challenges caused several issuers to fail, or to avoid failure only upon the receipt of external support, during the 2008 financial crisis.
Additional challenges have now emerged for banks with significant capital markets activities; these include more fragile funding conditions, higher credit spreads, increased regulatory burdens and very challenging macroeconomic and market environments. Some of these risks have been partly mitigated by changes to business models, and higher regulatory capital and liquidity requirements, but they have not been eliminated. Furthermore, these adverse trends have placed acute pressure on these firms` profitability and increased the scope of restructuring required in their core businesses to generate the level of return on equities expected by shareholders.
The combination of changed operating conditions and increased regulatory requirements and restrictions has diminished these firms` longer-term profitability and growth prospects. While we had initially expected their standalone credit profiles to recover once the acute phase of the crisis had passed, we now view these challenges as structural features of global investment banks.
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