Global banks want to stop Moody’s

Banks face risks to their creditworthiness spurred by a tendency to load up on debt.

The credit agency placed 17 banks on a review list for potential downgrading earlier this year.

Power brokers on Wall Street and other financial centres are reportedly trying to change the mind of Moody’s before it pulls the trigger on bank downgrades.

As the potential credit-rating downgrade draws closer, companies like Morgan Stanley remain unsure of the future.

Morgan Stanley, in particular, would need to post $9.6 billion in additional collateral to counterparties and certain exchanges if ratings firms cut its long-term credit rating by three levels. Moody’s Investors Service is indeed weighing such an action, which would drop Morgan Stanley from an A2 to Baa2 rating.

While that shouldn’t be a problem for companies with large cash hoards, a rating downgrade could also affect trading revenues, with some clients taking their business elsewhere as a result.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.