More Bank Downgrades: Full Fitch Release - BAC, BCS, BNP, CS, DB, GS, GLE, MS, UBS - All Downgraded!

Below, readers can find the full Fitch Ratings release downgrading nine major global financial institutions' credit ratings on Thursday afternoon. 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.