Moody's Downgrades U.S. Major Banks' Credit Ratings Following Sovereign Credit Cut

Long-term Deposit Ratings Downgraded for BoA, JPMorgan, and Others
Impact of Weakened U.S. Government Support Capabilities

Global credit rating agency Moody's has downgraded the deposit credit ratings of major large banks in the United States in succession, following its unprecedented downgrade of the U.S. sovereign credit rating from the highest level in 108 years.

Reuters Yonhap News

On the 19th (local time), Moody's downgraded the long-term deposit ratings of Bank of America (BoA), JPMorgan, and Wells Fargo from 'Aa1' to 'Aa2'.

Moody's also downgraded the senior unsecured debt ratings of certain divisions of BoA and Bank of New York Mellon (BNY) from 'Aa1' to 'Aa2' by one notch. In addition, Moody's lowered the long-term counterparty risk ratings of certain divisions of BoA, BNY, JPMorgan, State Street, and Wells Fargo from 'Aa1' to 'Aa2' by one notch.

This downgrade of U.S. large bank credit ratings by Moody's is analyzed as a chain reaction following the downgrade of the U.S. sovereign credit rating on the 16th. Moody's cited the sharp increase in U.S. federal government debt as the reason for lowering the country's credit rating. This, in turn, led to a decline in the creditworthiness of large banks, which receive implicit support from the U.S. government regarding financial institution liabilities.

Moody's explained, "The downgrade of the U.S. government's credit rating means that the government's ability to support highly rated financial institutions has been weakened to that extent."