Sat, Dec 17, 2011 - Page 10 News List

Fitch downgrades six global banks


Ratings firm Fitch downgraded six major global banks on Thursday, citing increased challenges in their business and the prospect of financial turmoil ahead.

Fitch lowered the long-term ratings on Bank of America and Goldman Sachs in the US, British bank Barclays, French bank BNP Paribas, German bank Deutsche Bank and Swiss bank Credit Suisse.

The downgrades “reflected challenges faced by the sector as a whole, rather than negative developments in idiosyncratic fundamental creditworthiness,” Fitch said in a statement.

By contrast, Fitch affirmed the ratings on Morgan Stanley, Societe Generale and UBS.

Fitch said the banks “are particularly sensitive to the increased challenges the financial markets face.”

“These challenges result from both economic developments as well as a myriad of regulatory changes,” the French-owned ratings firm said.

Banks have been under the gun since the 2008 financial crisis, hit by regulation after they helped plunge the global economy into recession and faced with tougher market conditions.

Fitch said the banks had made “significant progress” in building capital and liquidity buffers to withstand shocks, but they remained vulnerable to market sentiment and confidence.

Some familiar problems remain.

“The complexity of their business models ... make it more difficult to assess the size of loss that could emerge rapidly from unexpected events,” Fitch warned.

Fitch predicted further consolidation in the sector as new market conditions — including lower earnings and increased costs — would winnow the field.

Still, the big global banks “are much better placed to deal with difficult market conditions today than in 2008,” it said.

Fitch said the rating actions were based on its assessment of creditworthiness against the relatively high rating levels that the banks previously had.

Bank of America, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS were rated “A.”

BNP Paribas and Societe Generale were ranked one notch lower, at “A+.”

Fitch’s move comes weeks after fellow ratings agency Standard and Poor’s downgraded major global banks, including US banks Citigroup, Goldman Sachs, Wells Fargo, JPMorgan Chase, Morgan Stanley and Bank of America.

Fitch on Wednesday announced it had downgraded five European financial firms citing stronger headwinds in Europe’s banking sector.

The agency downgraded France’s Banque Federative du Credit Mutuel and Credit Agricole, Denmark’s Danske Bank, Finland’s OP Pohjola Group and the Netherlands’ Rabobank Group.

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