U.S. Banks' Ratings Cut by Moody's on Rising Sovereign Debt Concerns

Core Viewpoint - Moody's has downgraded the long-term credit and deposit ratings of several major banks following a downgrade of the U.S. sovereign credit rating, indicating a weakened ability of the government to support these banks during crises [1][3][5]. Group 1: Rating Changes - Major banks such as JPMorgan, Bank of America, and Wells Fargo had their long-term deposit ratings downgraded from Aa1 to Aa2 [1]. - The long-term senior unsecured debt ratings and issuer ratings for certain subsidiaries and branches of Bank of America and The Bank of New York Mellon Corporation were also downgraded to Aa2 from Aa1 [1]. - Long-term counterparty risk ratings for subsidiaries and branches of Bank of America, The Bank of New York Mellon, JPMorgan, State Street Corporation, and Wells Fargo were downgraded to Aa2 from Aa1 [2]. Group 2: Implications of the Downgrade - The downgrade of the U.S. Government's rating suggests a reduced ability to support major banks, which may lead to higher borrowing costs in capital markets for these institutions [5]. - Investors may demand higher yields to compensate for the increased risk associated with the downgraded ratings [6]. - The downgrade could also affect lending rates and credit spreads for banks like JPMorgan, Bank of America, Wells Fargo, The Bank of New York Mellon, and State Street Corporation [6].