June 22 (Bloomberg) -- Credit Suisse Group AG’s credit rating was cut three levels and Morgan Stanley’s was reduced by two as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms.
Credit Suisse was cut to A2, the same as JPMorgan Chase & Co. and BNP Paribas SA, as Moody’s completed a review of global banks with capital-markets operations it announced in February. Morgan Stanley and Zurich-based UBS AG, the other firms singled out for three-level reductions, were lowered two steps instead, the ratings firm said yesterday in a statement.
“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in the statement.
Lower ratings can lead to higher costs for borrowing and collateral. The downgrades leave Citigroup Inc. and Charlotte, North Carolina-based Bank of America Corp. as the lowest-rated banks among the 15 at Baa2, two levels above junk. Moody’s kept the long-term ratings of both lenders on negative outlook, which means they may be cut again.
Asian stocks fell, trimming a third weekly advance, after the Moody’s downgrades and reports signaling a slowing U.S. economic recovery. The MSCI Asia Pacific Index slid 1.1 percent as of 11:28 a.m. in Tokyo. Oil traded near a nine-month low.
JPMorgan’s Trading
JPMorgan, which reported a $2 billion trading loss last month, was included by Moody’s in the group of banks with the highest stand-alone credit ratings, along with HSBC Holdings Plc and Toronto-based Royal Bank of Canada. Moody’s said those firms had stronger “shock absorbers” from earnings in more stable businesses than investment banking and trading.
The trading loss at New York-based JPMorgan was an “important factor in the downgrade of the stand-alone credit profile,” Moody’s said. “It illustrates the challenges of monitoring and managing risk in a complex global organization and highlights the opacity of such risks.”
Royal Bank of Scotland Group Plc, based in Edinburgh, and Paris-based Societe Generale SA, were both cut one grade and Frankfurt-based Deutsche Bank AG and French lenders BNP Paribas and Credit Agricole SA were all lowered two levels.
Goldman Sachs Group Inc., Morgan Stanley and London-based Barclays Plc all had their holding company short-term ratings cut to P-2 from P-1.
Credit Suisse’s main operating subsidiary, Credit Suisse AG, also was cut three levels to A1 from Aa1 and the outlook is stable, Moody’s said.
