Moody’s: credit ratings will never return to 2007’s level

Tim Wallace
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FALLING government support and an uncertain economic environment mean banks should not expect their credit ratings to bounce back to pre-crisis levels ever again, ratings agency Moody’s said yesterday.

The report describes banks’ reliance on confidence-sensitive funding, their high leverage and their strong correlation with governments as “substantial and inherent risks.”

“The promise of implicit or explicit government support has historically served to moderate the banking sector’s fundamental riskiness for creditors, but the numerous and sometimes massive bank failures during the recent crisis have called that basic assumption into question,” said Greg Bauer from Moody’s.

As a result, even when the economy recovers and government finances improve, “credit ratings and standalone assessments are unlikely to revert to former levels”.