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Moody's Rating Action on Major USA Banks

Moody's Rating Action on Major USA Banks

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Published by American Kabuki
Moody's latest ratings on US Major banks
Moody's latest ratings on US Major banks

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Published by: American Kabuki on Aug 28, 2013
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12/03/2013

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Rating Action:Moody's reviews US bank holding company ratings to consider reduced government support
Global Credit Research - 22 Aug 2013Ratings on bank-level subordinated debt also affected
New York, August 22, 2013 -- Moody's Investors Service has placed the senior and subordinated debt ratings of the holding companies for the six largest USbanks on review as it considers reducing its government (or systemic) supportassumptions to reflect the impact of US bank resolution policies. Four -- GoldmanSachs, JP Morgan Chase, Morgan Stanley and Wells Fargo -- are on review for downgrade. Two, Bank of America and Citigroup, are on review directionuncertain, as the rating agency considers the potentially offsetting influence of improvements in the standalone credit strength of their main operatingsubsidiaries, the ratings on which were simultaneously placed on review for upgrade. Included in the review are the short-term ratings of several of thesebank holding companies, as described further below. Two additional banks, Bankof New York Mellon and State Street, whose ratings were previously placed onreview for downgrade, are also included in this review. At the same time, and also in response to the possible reduction of governmentsupport assumptions, the ratings on the bank-level subordinated debt of JPMorgan Chase Bank N.A. and Wells Fargo Bank N.A. were placed on review for downgrade, while those at Bank of America N.A. are on review directionuncertain. The bank-level subordinated debt ratings of The Bank of New YorkMellon and State Street Bank and Trust, which were previously placed on reviewfor downgrade, are also included in the review. There is no rated bank-levelsubordinated debt outstanding at Citibank N.A., Goldman Sachs Bank USA or Morgan Stanley Bank N.A.Moody's actions follow its March 2013 announcement that it would reassess itssupport assumptions for bank holding companies in the US and that it wouldconsider whether to revise these assumptions by the end of the year. As US bank resolution policies continue to evolve, Moody's will assess theopposing forces that may have an impact on bondholders at the holdingcompany level should a bank become financially distressed. The first is a lower level of systemic support that could result in a higher probability of default. Thesecond is the potential for a more orderly workout and a required minimum levelof holding company debt that may well limit losses in the event of a default. Thereviews will also consider the implications of such policies for bank-levelsubordinated bonds, which may also be subject to burden-sharing in the event of severe financial distress. In addition, for four of the eight banks -- Bank of  America, Citigroup, Bank of New York Mellon, and State Street -- the reviews willalso consider the banks' standalone or baseline credit assessments -- positivelyfor the first two, and negatively for the latter two.
 
"In the past year, we have seen progress towards establishing a framework tocredibly resolve these large systemically-important banks, as called for under theDodd-Frank Act," said Robert Young, Managing Director. "We have also seengreater cooperation and discussion among international banking regulators tomanage the coordinated resolution of global banking groups."The following ratings were placed on review for downgrade:The Goldman Sachs Group, Inc. -- A3 senior, Baa1 subordinated and Baa3 (hyb)trust preferred vehiclesJP Morgan Chase & Co. -- A2 senior, A3 subordinated, Baa2 (hyb) trustpreferred vehicles and Prime-1 short-term ratingJP Morgan Chase Bank N.A. -- A1 subordinatedMorgan Stanley -- Baa1 senior, Baa2 subordinated, Ba1 (hyb) trust preferredvehicles and Prime-2 short-term ratingWells Fargo & Company, Inc. -- A2 senior, A3 subordinated, Baa1 (hyb) trustpreferred vehicles and Prime-1 short-term ratingWells Fargo Bank, N.A. -- A1 subordinated and A3 (hyb) trust preferred vehiclesBank of America Corporation -- Prime-2 short-term ratingCitigroup, Inc. -- Prime-2 short-term ratingThe following ratings continue to be on review for downgrade, as initiated on July2, 2013:The Bank of New York Mellon Corporation -- Aa3 senior, A1 subordinated, A2(hyb) trust preferred vehicles and Baa1 (hyb) noncumulative preferredThe Bank of New York Mellon -- B bank financial strength rating (BFSR)/aa3baseline credit assessment (BCA), Aa1 deposits and senior and (P)Aa2subordinatedState Street Corporation -- A3 (hyb) trust preferred vehicles and Baa1 (hyb)noncumulative preferredState Street Bank and Trust Company -- B BFSR/aa3 BCA, Aa2 deposits andsenior and Aa3 subordinatedThe following ratings were placed on review for upgrade:Bank of America, N.A. -- D+ BFSR/baa3 BCA, A3/Prime-2 deposits and senior Bank of America Corporation -- B1 (hyb) noncumulative preferred
 
Citibank, N.A. -- D+ BFSR/baa3 BCA, A3/Prime-2 deposits and senior Citigroup, Inc. -- B1 (hyb) noncumulative preferredThe following ratings were placed on review direction uncertain:Bank of America Corporation -- Baa2 senior, Baa3 subordinated and Ba2 (hyb)trust preferred vehiclesBank of America, N.A. -- Baa1 subordinatedCitigroup, Inc. -- Baa2 senior, Baa3 subordinated and Ba2 (hyb) trust preferredvehiclesState Street Corporation -- A1 senior, A2 subordinated (direction of reviewinitiated July 2 changed from review for downgrade)The Prime-2 short-term rating of The Goldman Sachs Group, Inc. was affirmed.The noncumulative preferred stock ratings of The Goldman Sachs Group, Inc.,JP Morgan Chase & Co., Morgan Stanley and Wells Fargo & Company, Inc.have also been affirmed. The standalone credit assessments and the short- andlong-term deposit, issuer, and senior debt ratings of Goldman Sachs Bank USA,JP Morgan Chase Bank N.A., Morgan Stanley Bank N.A. and Wells Fargo Bank,N.A. were also affirmed.For a full list of all affected ratings, click here:http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_157695. This list isan integral part of this release.RATINGS RATIONALEPROGRESS TOWARDS CREDIBLE RESOLUTION MECHANISM AFFECTSRISKS FOR BANK HOLDING COMPANY CREDITORS As US bank resolution policies evolve, Moody's will review two opposing effectsthat influence risks for bondholders at the holding company level. The first effectis the reduced likelihood and predictability of systemic support that would resultfrom a credible bank resolution mechanism. Such mechanisms are designed toallow regulators to restore the solvency of a distressed bank without usingtaxpayer funds.The second, opposing effect is the possible reduction in the severity of losses for holding company creditors in the event of a default under a future US bankresolution. If executed as intended, more of a banking group's value may bepreserved versus a bankruptcy scenario due to a more orderly resolution of theentity. And expected requirements regarding holding company debt levels mayprovide greater resources for restoring solvency, reducing the size of haircutsimposed on holding company creditors.

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