Several trends are currently weakening the credit profiles of many rated banks globally, according to Moody’s.
These trends include:
(i) deteriorating sovereign creditworthiness, particularly in the euro area;
(ii) elevated economic uncertainty; and
(iii) elevated funding spreads and reduced market access at a time when many banks face large debt maturities.
In advanced economies, these factors are expected to lead to many banks experiencing downward migration of their standalone credit assessments and their debt and deposit ratings in 2012.
In the short-term, these pressures will primarily affect the ratings of global capital markets intermediaries (the largest firms trading securities and derivatives) and, in Europe, other banks exposed to financial market disruption. Moody’s expects to place the ratings of a number of these banks under review for downgrade during first-quarter 2012, in order to assess the effect of these trends on bank credit profiles.
Although Moody’s also notes positive factors — such as the accommodative stance of central banks in advanced countries and the strengthened regulation designed to make banks safer — the positive trends are overshadowed by the aforementioned negative credit factors, in Moody’s opinion.