RATINGS agency Moody’s yesterday cut the debt ratings of three of America’s biggest banks on worries the US government would be less likely to support a large lender if it got into trouble.
Bank of America’s long-term senior debt rating has been cut from A2 to Baa1, Wells Fargo long-term debt has dropped from A1 to A2, and Citigroup has seen its short-term debt cut from Prime-1 to Prime-2.
The government is “more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute”, the ratings agency said.
The action concludes a three-month review that began in June when the ratings agency said the banks faced a potential downgrade.
Moody’s said the long-term outlook on the bank’s senior ratings remains negative.
Bank of America shares slumped 7.5 per cent after the announcement. Citigroup fell more than 5.2 per cent, while Wells Fargo dropped 3.9 per cent.
Meanwhile Standard & Poor’s cut its ratings on seven Italian banks following its downgrade of the troubled Eurozone country on Tuesday.