Credit rating agency Moody's announced the downgrade of 15 global financial institutions, including the five largest American banks, in an after-hours press release today. According to the Wall Street Journal, Moody's placed these banks under review in February, as uncertainty in the Eurozone and a slowdown in the United States and China raised concerns about the abilities of large financial institutions with international trading operations to deal with market shock. These downgrades may require affected banks to post more cash or high-grade bonds as collateral, likely to further drive down yields on safe assets like U.S. treasuries. Morgan Stanley, widely regarded as the most vulnerable of the "Too Big To Fail" banks, was spared a potential three-notch downgrade, but was dropped two levels to Baa1, only three notches above junk.

 

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