By Liz Moyer
Moody's Investors Service put ratings of big U.S. bank holding
companies on watch for possible downgrade, citing a possible
removal of extraordinary government support now that the industry
is moving closer to formalizing plans for liquidating banks in
crisis.
The agency joins Standard & Poor's Corp., which said earlier
this week it was also reviewing the holding company ratings of Bank
of America (BAC), Wells Fargo & Co. (WFC), J.P. Morgan Chase
& Co. (JPM), Citigroup (C), Bank of New York Mellon Corp. (BK),
State Street (STT), Morgan Stanley (MS) and Goldman Sachs (GS) for
similar reasons.
These biggest U.S. banks' ratings have gotten a slight boost
since the financial crisis erupted five years ago because of the
extraordinary support the government extended to aid the financial
system. More recently, regulators and lawmakers have worked with
banks to come up with plans for their orderly liquidation in the
event of another crisis.
Now that those plans are getting more firm, the government may
withdraw its support and the holding company ratings could drop as
a result, the ratings agencies said in separate announcements this
week.
Moody's said Thursday that a possible offset to the removal of
government support is the reduction in the severity of losses for
holding company creditors in the event of an orderly liquidation
versus a bankruptcy.
Moody's said its ratings for Goldman, JP Morgan, Morgan Stanley
and Wells Fargo are on review for possible downgrade. Bank of
America and Citigroup are on review, direction uncertain, the
agency said. Both banks have improved standalone ratings that could
offset the effects of the removal of government support.
Moody's previously had placed some ratings on debt of Bank of
New York and State Street on review for possible downgrade.
Moody's said in March it would consider whether to revise its
ratings assumptions based on the government support by the end of
the year.
Write to Liz Moyer at liz.moyer@dowjones.com
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