Credit Suisse, the second-largest Swiss bank, received the maximum reduction that Moody's said in February it may make during a review of global banks with capital markets operations. Morgan Stanley and UBS AG (UBSN), the other firms singled out for such a steep cut, were lowered two steps instead.
"All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities" Moody's Global Banking Managing Director Greg Bauer said today in a statement.
The downgrades may force banks to post additional collateral to trading partners in derivatives deals while boosting the companies' borrowing costs. Moody's said when it announced the review that it was seeking to reflect the banks' reliance on fragile confidence in funding markets and increased pressures from regulation and a difficult market environment. (more)