Euro Crisis : Banks Downgraded

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Fifteen major global financial institutions were downgraded by Moody’s late last night, reflecting losses the ratings agency says are likely due to the current, ongoing volatile state of capital markets.

Affected lenders included British banking giants Barclays, HSBC, RBS and Lloyds as well as Credit Suisse. The Swiss institution was dealt the harshest and most unexpected blow as the only bank to be downgraded three ‘notches’.

In the US, Bank of America and Citigroup were among those marked down. Others were Goldman Sachs, Morgan Stanley, JP Morgan Chase, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank and Royal Bank of Canada.

Moody’s had announced in February a review was underway into global  investment banks’ ratings, so the news was not a huge shock to  markets.

Yet the pre-warning did not prevent New York’s Dow Jones index from experiencing its second worst day’s trading of 2012 yesterday, as speculation about the impending downgrades mounted.

London’s FTSE100 was down initially this morning following the news, combined with poor global growth forecasts.

Yet investors have since seemed to shrug off the downgrades, some of which were not as significant as had been expected. HSBC was trading 0.5 per cent higher at 562.1p at midday after it received a one-notch downgrade, rather than the two-notches that had been expected.

In other major news, sources have revealed The European Central Bank (ECB) may scrap credit ratings on Eurozone debt, instead setting their value when used as collateral in lending operations on its own  internal assessment.

Another poor data release from Germany indicates the German economy is on the retreat. Solid growth in China and the US had last year helped counteract the poor performance of Europe yet now these important trading partners are feeling the pain from the euro zone fall out.

Meanwhile, independent auditors have estimated Spain’s crisis-hit, debt-laden banks will require €62bn in extra capital in order to survive the euro crisis.

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