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Fitch Downgrades 8 Global Banks Including BNP, SocGen, BofA, Deutsche, And Morgan Stanley
Every day after close it is one endless downgrade parade in which any of the permutations of rating agencies and either European sovereigns or banks get up and start playing musical chairs with each other. Then proceed to sit down for the overnight session. One of these days all the chairs will have been pulled. The banks cut in some capacity, either via long-term IDR or viability rating, are Bank of America, Barclays, BNP, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and Societe Generale. Now we know that even creditors do not want to trigger any ratings downgrade covenants because it would offset what is likely a terminal margin call, but at some point someone will need to do through the various bond docs and find out just who (ahem Bank of America) will need to post far far higher collateral as a result of all these relentless downgrades.
From Fitch
FITCH DOWNGRADES VIABILITY RATINGS OF EIGHT GLOBAL TRADING AND UNIVERSAL BANKS
Fitch Ratings-New York-15 December 2011: Fitch Ratings has today taken rating actions on nine global trading and universal banks (GTUBs). The actions complete its assessment of the GTUBs, carried out in conjunction with a broad review of the ratings for the largest banking institutions in the world. Fitch has downgraded eight issuers' Viability Ratings (VRs) and affirmed one, removing them from Rating Watch Negative where they were placed on Oct. 13, 2011.
For a list of key rating actions refer to the end of this release. Full lists of rating actions affecting each bank are published today in separate comments on the affected banks.
The impact of VR downgrades on the banks' Issuer Default Ratings (IDRs) has depended to some extent on the level of their Support Rating Floors. IDRs are the higher of the VR and Support Rating Floor.
The VR downgrades reflected challenges faced by the sector as a whole, rather than negative developments in idiosyncratic fundamental creditworthiness.
However, Fitch differentiates among the peer group, in relation to its business mix, capitalisation, liquidity strength and market position.
The actions were motivated by Fitch's view that the GTUBs' business models are particularly sensitive to the increased challenges the financial markets face.
These challenges result from both economic developments as well as a myriad of regulatory changes. Fitch incorporated the significant progress it sees the banks have made in building up capital and liquidity buffers to resist market challenges, which has kept the VR downgrades to one or two notches.
Nonetheless, Fitch continues to be of the opinion that, however well-managed, the structural aspects of their funding, earnings, and leverage, predispose GTUBs to vulnerability to market sentiment and confidence, particularly during periods of exogenous financial stress. Furthermore, the complexity of their business models and exposure to fat tail risk make it more difficult to assess the size of loss that could emerge rapidly from unexpected events.
Over time market conditions are likely to ease, but Fitch expects market volatility to remain above historical averages and economic growth in developed markets to remain subdued for a prolonged period. This makes many business lines in securities operations more difficult, due to lower activity and higher funding costs.
While regulation enhances creditworthiness of banks generally by forcing them to hold higher capital and liquidity and curbing risk-taking in some areas, it also restricts earnings potential and increases costs, which encourages increasing the scale required to remain efficient and will likely reduce the number of market participants.
Reshaping business models to address the challenges they are currently facing will be an ongoing focus for GTUBs over the coming two years. It remains uncertain which of the GTUBs will emerge as the strongest once the new regulations are fully implemented and business appropriately adjusted, although Fitch views leading market positions across various products and geographies as a good indicator, especially if backed by substantial core capital.
Leading commercial banking or wealth management franchises are also an important consideration for Fitch's ratings of universal banks. For many of these banks, higher weighting of securities businesses on earnings and risk profiles is a negative factor in their ratings, and establishment of a more balanced business mix could be a positive ratings driver.
Fitch believes the GTUBs are much better placed to deal with difficult market conditions today than in 2008. Capitalization and liquidity are improved and vulnerabilities reduced. The rating actions taken were based on Fitch's assessment of creditworthiness against the relatively high rating levels that the GTUBs previously had.
The GTUBs have been improving liquidity, which has been a particular area of focus for the group. These banks ensure that they have significant liquid reserves in order to be able to meet obligations even if funding markets were to close for a significant period of several months. Although Fitch views such measures positively, the liquidity position would be less of a defense against any 'bank specific' concerns, should they arise, because a sound liquidity profile is expected of all the GTUBs.
Fitch notes that the exact specification of various metrics, along with any adjustments made, can influence the relative ranking of the various GTUBs. These metrics can also vary significantly over time, can be backward looking and make it more important to take a more balanced, forward view of creditworthiness.
Fitch's focus in evaluating the banks has been on those that have the best positions in diversified the product areas that are viewed as having the lowest risk.
The following highlights Fitch's ratings actions:
Bank of America Corporation
--Long-term IDR downgraded to 'A' from 'A+';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'bbb+' from 'a-'.
Barclays plc
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
BNP Paribas
--Long-term IDR downgraded to 'A+' from 'AA-';
--Short-term IDR affirmed at 'F1+';
--Viability Rating downgraded to 'a+' from 'aa-'.
Credit Suisse AG
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
Deutsche Bank AG
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
The Goldman Sachs Group, Inc.
--Long-term IDR downgraded to 'A' from 'A+';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'a+'.
Morgan Stanley
--Long-term IDR affirmed at 'A';
--Short-term IDR affirmed at 'F1';
--Viability Rating downgraded to 'a-' from 'a'.
Societe Generale
--Long-term IDR affirmed at 'A+';
--Short-term IDR affirmed at 'F1+';
--Viability Rating downgraded to 'a-' from 'a+'.
UBS AG
--Long-term IDR affirmed at 'A';
--Short-term IDR affirmed at 'F1';
--Viability Rating affirmed at 'a-'.
On Oct. 13, 2011 UBS AG's IDR was downgraded to 'A' from 'A+' due to a downgrade of its Support Rating Floor and its Viability Rating remained on Rating Watch Negative. Bank of America's VR was placed on Rating Watch Negative on Oct. 13, 2011.
The report 'Global Trading and Universal Bank Review: Resilience Increased but Challenges Remain' and the individual company rating action commentaries referenced above are available on 'www.fitchratings.com' and provide more specific details regarding each individual bank affected by today's actions.
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BoA under $5 Bitchez!
As much as I would like to see that - don't hold your breath.
What about Citi? Fuck, they need downgrading, too. My puts are waiting...
today is opposite day, as is everyday in this market for the last 4 months, so normally this would be pretty bad, but spx will probably rally on this
What about the JP Morgue? I'm really disappointed they were not included!
Why no Spanish banks or Italian banks? And where the hell is Commerzbank?
S&P nailed 10 Spanish banks today. hasta la vista!
Bofa after hours rallying!!!! I jus't don't get how did the algos process this piece of news.
PPT player...
On top of the downgrade, Lehman (Talk about a zombie bank) just sued BoA over Archstone, somewhere in the neighborhood of 5B. I guess this is just chump-change nowadays??? Totally bullish.
It's just SkyNet messing with our heads. It makes perfect sense for BAC to go up when downgraded, right? :)
yup, almost always close oput shorts thursday. don't mind a rebuy at the close friday, I almost always buy close thorsday as well.
All we need is one day Rodney.
Missed it by that much...
Great post!...Your Avatar will require me to extend my pyschiatrist sessions for another 6 months! I feel empathy for the Corn Dog....
You know I never noticed the corn dog untill you said something.
LONG Pfizer (makers of Zoloft), bitchez! and of course by LONG I mean a pun on the Corn dog. :)
Not so sure. They won't risk a bank catastrophe.
We have LOTS of ink.
Go long green ink!
We see 5.50 before 4.50.
maybe 3.00, then 5.50 after the ink. Then 0.00 after that at some point.
cool
'The banks cut are Bank of America, Barclays, BNP, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Societe Generale, UBS.'
3 US
2 French
2 Swiss
1 German
1 British = 9
Bullish because it's only 1 German bank. And Fitch could have slashed ratings much more. BTFD! [/sarc]
It says 8 global. They must not consider one of these global
Good point.
BAC ain't global...
i think the eight refers to downgrades. ubs's ratings were kept the same (affirmed).
How do the two French banks -- BNP Paribas and Societe Generale -- merit a rating one notch above the others?
Paging Reggie Middleton!
8 is correct...UBS was not downgraded, but affirmed.
I think that UBS was affirmed and not cut, so 8 out of 9 were cut as stated in the piece. No?
BOOM.
you must mean BOOM to the upside for stocks. ah and dow is up 60 points...market just doesnt give a shit anymore. this isnt anything that the market isnt aware of............there is never a crisis till there is a crisis, and right now there isnt a crisis..............
Uncle Warren? React.
Warren is singing the Mr. Bubbles song with Erin...he's distracted at the moment.
Becky Quick is washing his taint
He did. Check the Depends.
No large effect whatsoever on AH and futures. I think this actually might take the relief off financials for the moment.
All we need now is for Blackrock to come up with a statement saying that Greece has decided to embrace the Drachma afterall, and we are all set.
My money is on S&P for its next downgrade bonanza and I'm thinking sovereign downgrade instead of banks and maybe on Sunday, just to make for a giddy beginning of the week.
Controlled financial demolition...
only controlled 'cause they waited 'till market close!
Fitch: "Our arms are getting tired from this circle jerk."
mommy, is my piggybank safe with uncle corzine? WELL! DAMN IT MOTHER! IS IT SAFE OR NOT, BITCH?
Mommy's doing "uncle" Corzine right now to get your money back dear, just a few more rides.
S&P cuts 8 Spanish Banks
http://www.reuters.com/article/2011/12/15/us-spain-banks-sp-idUSTRE7BE1S...
oops...make that 10
There is that word, again! Why can't the banks just rehypothecate some more collateral from that Gerald Celente guy?
You think they've been... uh... er... you know... commingling? No! I meant hyper-hypothecating?
Read in the post where Fitch refers to it as,
"...reshaping business models to address the challenges..."
We can call it re-hypo-co-collateral-mingling, or just agree to use the colloquialism, "clusterfucking."
Genius
Fitch gets a SET baby - and to think the MIGHTY GOLDMAN SACHS GROUP's credit rating is almost identical to BoA is choice - Remember BoA 'purchased' Toxicwide Tanning Salons (aka Countrywide Financial) - Take that BlankenSTEIN...The light in the distance just might be the Villagers descending upon your Castle!
World Domino Dooms Day coming at the soonest!!
This is different. They usually wait until after the bankruptcy to downgrade.
It's so meaningless anymore, the few things remaining about capitalism and those left to grade and evaluate the system and give useful commentary are irrelevant, the government and the big boys behind them pulling the strings now are in charge and will decide what is kosher now and everyone else has no choice but to fall in line and like it.
Getting very tired of all this. And we are just starting.
So all the jaw boning about no more QE by Merkel, Ben and Draghi (Germany, Fed, ECB) are about as much hyperbole as was the outcome of the EU "super summit". This article from metalaugmentor.com spells out some of the methods and motives behind the pre-emptive gold strike yesteray and is very detailed and one of the best I've read today. Tyler, hope you can expand on it please.
Charlatan Exposed: Negative Gold Lease Rates This series of downgrades could be the catalyst for the first link in the derivatives chain rehypothecation viral event. One would think that rather than jaw boning a "no new QE" position that the central banks would be doing pre-emptive QE promotion to prop up everything. Earlier today I wrote: "Despite the jawboning by Ben at the Fed and Draghi at the ECB about no immediate easing, the fact remains that they are the current sovereign debt "market" if you can call it that. It is a vacuous market and in an election year especially, with the prospect of having "End the Fed" candidates running the country in 2013 like Gingrich or Paul, the likelihood that more overt QE will not be catalyzed by the fact that the BRICs are seeing substantial GDP growth contraction, that austerity and completely un-repayable toxic debt backed currencies are under pressure and that the so called "super summit" in the EU basically resulted in a blank piece of paper that has changed Nothing, resulting in a contraction in EU growth and with negative real interest rates in the UK and US and likely elsewhere, gold remains the only money (not a fiat currency) which is not encumbered and backed only by toxic debt and the Fed will have to apply shock and awe levels of QE just to keep the S&P from falling to 800 and putting Gingrich in office." These downgrades may comprise the substance of what your previous post on the Australlian preparations for a mass meltdown may embody.
Duffminster Times
Futures not impressed.
They need to downgrade when US opens 1 hour after Cash opened :-) And one before close.
And seperatly. Not 8 at once. :-)
I thought "TBTF margin call" was already synonymous with "fire up the turbo printing presses" so I'm not really sure how these downgrades change anything on the ground.
how will they spin this bullish?
Gotta have free money for everybody?
this is like watching the Miss Universe financial contest turning into the sleazy broads of broadway and 42nd hookers bar on parade, looking for usual suckers to rip off. I feel like a gawker who was once a naive stalker of the best and hottest chicks in town. Yukky yuk yuk.
Bump in futures!! Woohoo, downgrades!!
Now, we have a considerable and sustained rise in futures! It's green across the board! Woohoo! More crack, please.
When the whole class is flunking, it must be Professor Bernank's fault.
What about the slobs at Wells Fargo?
URGENT FAX FROM RI SENATOR MOURA TO SENATOR JACK REED
Taxpayers hosed for hundreds of billions of fiats. Senator Moura has the temerity to demand accountability from TBTF. Shari Ruber (Wells Fargo Office of the President 515-324-9877) called the Senate President's office to complain.
Screw you!
Damn, Sen. Moura!!! You go girl!!!
She may get my first campaign contribution for 2012 whether she's up for reelection or not.
She's a freshman...and has not been infected by the Pig-Men. I love you Senator Moura!
Paging Dick Bove....Another buy of the century day coming up (last one was 6 weeks ago)?
'GTUBs'? Sounds like a euphemism for bloody gut-buckets!
Tomorrow, I am going to hide in Kyle Bass' ranch. Maybe he will hire me to gaurd it for him.
They just downgraded believe, not faith or hope.
8 of the largest banks in the world downgraded. There are $707 trillion in unregulated derivatives like credit default swaps. These banks are probably responsible for at least $300 trillion of those unregulated derivatives. Forget sovereign debt problems .. it is insolvent bank problems now. Bernanke handed out $29 trillion in 2008. Get ready to hand out $50 trillion now.
Got gold? No..... you sold today??
Too bad.
I dunno...once upon a time this woulda been shocking and woulda provoked a huge sell, even a crash.
Today this will have about the same effect as all of us yelling "Bad, Bad Bank!" all together out the window.
Downgrades mean nothing when the backstop is the fountain of eternal bank youth...ie the Fed as lender of last, first and only resort. The man behind the curtain says not to worry, all debts will be paid and settled...eventually and one way or another. Promise.
world markets will probably gap up 2% tomorrow now that this downgrade news is out...
L0L!!!
the squid is about to issue a buy recommendation on its own stock; when their debt gets downgraded, they will book a ton of income!
will the morgue get it soon as the fallout from The MFGlobal Silver Caper leads our darling blythe to ask: is orange a good color for me?
Awsome!!!!!! Its a buy signal!!!!!!!!!
Lemme see a show of hands for anyone here that thinks this matters anymore.
Doom is right around the corner. Lehman was A+ when it went under.
"Today's rating action follows the collapse in market confidence in the firm, and Lehman's announcement that it was filing for Chapter 11 bankruptcy...."
Fitch cut its long-term and short-term issuer default ratings on Lehman Brothers Holdings and other subsidiaries to default or "D", its senior debt to CCC from A+, and its subordinated debt and preferred stock to C from A.
http://www.reuters.com/article/2008/09/15/lehman-moodys-idUSLF2328620080915
If we could only have a 20th EU summit this year - I feel that it would be the lucky one.
The musical chairs downgrade circle jerk? Who was it that said "While the music's playing, we'll keep dancing?" Oh yeah...wasn't it Angelo "Fake Tan" Mozilo?
Can't wait for Act III....
BofA CEO Brian Moynihan: "Oh please don't downgrade me, my stock is already trading at nothing per share, I don't know how much lower it can go!!"
BofA remains safe. It takes like 5 seconds for the Fed Reserve to create 1 quadrillion dollars.
It will take a lot more suffering, collapse in the divison of labor, and disintegration of civilization before the mass of boiling frogs do anything about this de facto socialism.
They are lowering the ratings to save their own ass. The Meltdown is coming soon and when it happens it will look so funny for Fitch to have very high rating for insolvent banks.
They tried everything to delay the inevitable but now the end is near, they had no other choice but to downgrade.. This means the end is coming soon...
http://www.youtube.com/watch?v=CirrRY_6aaU
Looking at BACs chart and someone or something is not letting it go below $5.25 after hours. It is almost like there is some invisible hand holding it up...hmmm...wonder who that could be.
>It is almost like there is some invisible hand holding it up
Well, it's not Adam Smith's invisible hand
$5.20 is a hard limit, kind of like the speed of light is 299,792,458 metres per second. If you monkey around with that shit the whole universe will explode.
youre on fire today spas
I thought Benny could change it all in 15 minutes...
Benny the Bitch, print bitch print...lol.
"I had no idea this happened."
"I never gave persmission for this to happen."
"I had no intention of deception."
"Time for Congress to call Fitch to 'explain."'
The Bernank has to hold out with printing until Europe cracks. No money for you!
Tomorrow may be a good day to make a withdrawel of enough physical cash to get you thru the next couple of weeks. There is only 1000.00 of physical cash per person available in the US. Plastic won't buy you shit if atms take a holiday.
Plus 3 points to the TD editors, for showing the proper use of the serial comma in the header to this piece. However, minus 3 for omitting the comma in the same header, preceding the word "Including".
Just so you know, we're reading this stuff really carefully.
Everyone of these banks are Primary Dealers that can continue to borrow at less than one quarter of one percent from the FED. If that doesn't tell you the entire banking system is fucked nothing will.
Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts
unelected.org
The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the right), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.
What was revealed in the audit was startling:
$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious - the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.
To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is "only" $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is "only" $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.
In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.
When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.
Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.
The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..
View the 266-page GAO audit of the Federal Reserve(July 21st, 2011): http://www.scribd.com/doc/60553686/GAO-Fed-Investigation
Source: http://www.gao.gov/products/GAO-11-696
FULL PDF on GAO server: http://www.gao.gov/new.items/d11696.pdf
Senator Sander’s Article: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
www.unelected.org