Banks worldwide face up to credit rating downgrades. Image credit: Sanja Gjenero
Moody’s has significantly downgraded the credit ratings of many of our major banks, including the Royal Bank or Scotland group (RBS), HSBC, Barclays, and US firms JP Morgan, Goldman Sachs, Morgan Stanley, Citibank, and the Bank of America, in response to the recent eurozone turmoil. Santander, the Spanish-based bank with millions of customers throughout Europe, has already been hit with a credit downgrade, earlier this year. What do these lower ratings mean for consumers, and will this decision further damage our fragile economies?
Who Issues Credit Ratings?
These reports are the result of investigations by Moody’s – one of the three main credit rating agencies, whose market analyses create an impact worldwide. Their credit ratings system takes into account how likely a firm or business is to repay loaned resources, with grades ranging from AAA (the highest score and a grade the British economy as a whole has traditionally enjoyed, but which is now under threat) to C, which is the lowest rating, meaning that repayment is highly unlikely. June 2012 saw many of the major banks being downgraded by at least one notch on this system, typically to a low-end A rating or high-end B rating.
Click to Read Page Two: How Will the Credit Downgrade Affect Borrowers?
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