Moody's Downgrades 15 Major Global Banks, Including BofA, JPMorgan Chase
The credit rating agency Moody's Investor Services just downgraded the ratings of 15 of the world's largest banks.
Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs were among them.
"The ratings agency said late Thursday that the banks were downgraded because their long-term prospects for profitability and growth are shrinking.
"The ratings agency said it was especially concerned about banks with significant capital market activities during a time of increased volatility in markets."
Credit Suisse, the second largest bank Switzerland, was most severely affected, cut by three levels.
"The downgrades may force banks to post additional collateral to trading partners in derivatives deals while boosting the companies' borrowing costs," reports Bloomberg. "Moody's said when it announced the review that it was seeking to reflect the banks' reliance on fragile confidence in funding markets and increased pressures from regulation and a difficult market environment."
A full list of the affected banks is at Moody's website.
Update at 6:45 p.m. ET. Banks Stocks Jump:
The Wall Street Journal's Market Beat is already calling for a "relief rally," because "the cuts weren't as severe as previously expected."
"J.P. Morgan is up 0.8%, Bank of America is up 1.2%, Citigroup is up 0.7% and Goldman Sachs is up 0.3%.
"Remember, these downgrades are expected to raise borrowing costs, and could crimp some lucrative trading businesses at these banks."
One analyst speaking to the AP, reports that Moody's had been signaling these downgrades for a while now, so the market has already "priced in" the downgrades.