Four European and three US banks have been downgraded by Fitch Ratings, which warns they are “particularly sensitive” to the challenges facing the global financial system.
BNP Paribas and Deutsche Bank had their long-term issuer default rating downgraded one level to A plus, while Barclays and Credit Suisse were taken down two levels to A.
Bank of America, Citigroup and Goldman Sachs were downgraded one level, from A plus to A.
Fitch, which is the smallest of the big three ratings agencies, also warned that the banks face “a myriad of regulatory changes”.
Fitch accepted that the banks have made “significant progress” in building up capital and liquidity buffers to protect against market challenges, and said these efforts prevented more severe downgrades.
But the agency said that “however well-managed, the structural aspects of their funding, earnings, and leverage, predispose [global trading and universal banks] to vulnerability to market sentiment and confidence, particularly during periods of exogenous financial stress”.
“Furthermore, the complexity of their business models and exposure to fat tail risk make it more difficult to assess the size of loss that could emerge rapidly from unexpected events.”
©2011 funds europe
