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.