Moody’s Ratings cut its ratings for deposits at some of the biggest banks, including Bank of America Corp., JPMorgan Chase & Co., citing Friday’s downgrade of the US and the government’s weakened ability to support the firms.
Long-term deposit ratings at units of Bank of America, JPMorgan and Wells Fargo & Co., were lowered by one step to Aa2, Moody’s third-highest level. The bond grader also downgraded the senior unsecured debt ratings for some units of Bank of America and Bank of New York Mellon Corp, cutting them to Aa2 from Aa1.
Additionally, Moody’s cut the long-term counterparty risk ratings for some units of Bank of America, BNY, JPMorgan, State Street Corp. and Wells Fargo, lowering them one notch to Aa2.
It’s the latest example of the ripples that Moody’s sovereign downgrade has generated. The firm stripped the US of its top credit rating, lowering it by one step to Aa1, blaming successive administrations and Congress for swelling budget deficits that it said show little sign of abating.
That downgrade rebounds to companies, investors and consumers that effectively lend money to banks through providing deposits, entering derivatives trades or buying unsecured bonds from units of the lenders. The US government implicitly offers at least some support for the obligations of these too-big-to-fail entities, according to Moody’s.
“The downgrade of the US government’s rating indicates that it has less ability to support these highly-rated obligations,” Moody’s analysts wrote.
Through Moody’s downgrades, it removed the “one notch” of US government support the ratings previously included.
Some grades on certain debt or operations of the biggest US banks, however, will keep that uplift for now. They include the long-term senior unsecured debt ratings and issuer ratings for JPMorgan Chase Bank and Wells Fargo Bank as well as the counterparty-risk rating and assessment for some Morgan Stanley subsidiaries.