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

06/02/2011 02:30 pm ET | Updated Aug 02, 2011

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.

Suggest a correction