Moody's may cut ratings of some of world's largest banks because their long-term prospects for profitability and growth are shrinking; banks include Bank of America, Citigroup, Goldman Sachs

Cindy Allen

NEW YORK , February 16, 2012 (Associated Press) – Moody's Investors Service may lower the ratings of some of the world's largest banks as well as those of some securities firms because their long-term prospects for profitability and growth are shrinking.

Some of the banks under review for downgrades include Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase, the Royal Bank of Canada and Morgan Stanley. Moody's also extended ongoing reviews for downgrades on 11 companies.

The announcement comes just days after the ratings agency said that it was cutting the ratings of Italy, Portugal and Spain because of uncertainty over the eurozone's ability to enact reforms necessary to dig out of its debt crisis and Europe's weakening economy.

Moody's said late Wednesday that nine of the 17 banks and securities firms under review are headquartered in Europe. The agency said that it is concerned that banks with significant capital market activities are dealing with challenges such as widening credit spreads, delicate funding conditions and increased regulatory requirements and restrictions.

Some of the risks facing banks have been mitigated by increased regulatory capital and liquidity requirements, but they have not gone away completely, the ratings agency said.

Moody's said its review will concentrate on the parent companies and major operating companies of the 17 banks and securities firms. The agency said it will address subsidiaries that might be impacted by the potential weakening of their parent company's credit profile separately.

The agency said it is extending its reviews on whether to lower ratings on Credit Suisse, Macquarie, Nomura, UBS, Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC, Royal Bank of Scotland and Societe Generale.

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