Eight US banks have credit ratings downgraded on future bailout uncertaintiesComments Off on Eight US banks have credit ratings downgraded on future bailout uncertainties
Eight of America’s biggest banks, including JPMorgan Chase, Bank of America and Citigroup, had their long-term credit rating downgraded by Standard & Poor’s on Wednesday on the grounds they were less likely to get a government bailout in a crisis.
Other banks affected were Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon and State Street.
The ratings agency said: “We now consider the likelihood that the US government would provide extraordinary support to its banking system to be ‘uncertain’ and are removing the uplift based on government support from our ratings.”
Usually cuts to credit ratings make it more expensive for companies to borrow money from the wholesale debt markets.
However, S&P’s move was not unexpected after the US Treasury forced banks to raise the amount of debt they hold which could be converted into equity in a crisis.
In fact, the new rules could make banks with big investment banking operations stronger, S&P said.