A major potential negative catalyst for financials globally is rapidly
approaching as 114 banks are on review-for-downgrade by Moody's across
16 countries. Why do we care so much about ratings given their
historical credibility? Ask James 'Jimmy-boy' Gorman of Morgan Stanley who
is currently begging cap-in-hand to Moodys not to downgrade his empire bank, since he knows (and so
it seems does the CDS market) that, as the
FT notes, a downgrade could also force the bank to provide
additional collateral to back its vast derivatives business - where it acts as
one of the largest counterparties. In Europe, the fun heats up in the
next few weeks as first Italian banks (4/16), then Spanish banks (4/23) and then
Austrian (4/30) face from 1 to 4 notch downgrades and the potential to lose
their short-term (funding-/CP-related) Prime-1 top rating, implicitly
raising funding costs (and liquidity concerns) even
further.
and potentially even more serious, banks that face loss of P-1 short-term rating...
Source: (ironically) Morgan Stanley
and potentially even more serious, banks that face loss of P-1 short-term rating...
Source: (ironically) Morgan Stanley
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