NEW YORK–Moody’s Ratings has downgraded the long-term ratings of several of America’s largest banks, including JPMorgan Chase, Bank of America and Wells Fargo, the result of weakened prospects of federal support in the wake of last week’s U.S. sovereign downgrade.
“The move marks a rare blow to the top tier of the U.S. financial system and may raise borrowing costs and regulatory pressure on institutions still seen as systemically important,” Investing.com said in its analysis. It noted the rating agency lowered deposit ratings, senior unsecured debt, and counterparty risk assessments for key subsidiaries and branches of the banks to Aa2 from Aa1.
‘Notch of Uplift’
Those ratings had previously included a “notch of uplift” tied to the government’s Aaa rating, support Moody’s no longer deems as fully credible following the downgrade of U.S. sovereign debt to Aa1, the report stated.
“The downgrade of the U.S. Government’s rating indicates that it has less ability to support the US’s global systemically important banks,” Moody’s said in a statement. “The ratings and assessments downgraded in today’s action all previously incorporated one notch of U.S. Government support uplift and this notch of support has now been removed.”
Moody’s indicated there could be potential future revision upward should JPMorgan’s fundamentals remain strong.
Stable Outlooks
In addition, Bank of America and Wells Fargo now carry stable outlooks on their long-term deposit and senior unsecured ratings, down from negative, aligning with their broader financial profiles, Investing.com said.
Moody’s said its ratings reflect moderate government support assumptions but also individual metrics such as profitability, capital buffers, and risk management practices.
Other major banks also saw downgrades.
