Moody's Considers Downgrade Of Major Banks Due To Dodd-Frank

NEW YORK (Maria Aspan) - Moody's Investors Service said it may downgrade the debt ratings of Bank of America Corp, Citigroup Inc and Wells Fargo & Co, citing concerns about waning political willingness to offer support for the largest U.S. banks.

The ratings agency said on Thursday it placed the deposit, senior debt and senior subordinated debt ratings of the three banks under review for possible downgrades.

Lower ratings can translate into higher borrowing costs, which can have a big impact on a bank's bottom line.

Moody's said the banks' ratings are currently buoyed by "uplift" from government support of the banking system during the financial crisis.

But the U.S. Dodd-Frank financial reform law of last year has reduced the level of government support that large U.S. banks can count on. The banks' ratings may need to be downgraded to reflect the loss of that "uplift," Moody's said.

The ratings agency also cited other major risks facing the banks, including their large exposure to residential mortgages and their potential legal costs related to faulty foreclosure practices.

Shares of all three banks were down less than 1 percent at mid-morning.

(Reporting by Maria Aspan; Editing by Derek Caney and John Wallace)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[mrhandyman3105]

02:05 AM on 06/03/2011

Faulty foreclosures aren't the banks only problem.
The fact that they are sitting on thousands of already foreclosed property keeping them off the market in order to keep property prices inflated is a "major" concern of theirs if they had to put them on the market. The ratings agencys know this and has been holding back acting on it because of the effect it would have on the economy which is already on the brink on collapsing.
But now the ratings are getting skittish about holding back any longer because of the backlash they would incur if it all collapsed. Might seem to the public that they are in cahoots with the banks to keep prices inflated. (oh...did I say that"they "are" in cahoots with the banks"? Sorry must have slipped my tongue).

[giwel7]

04:21 PM on 06/02/2011

so what does this mean? a true rating without government bailouts?