Some of the nation's largest banks swung their doors open this morning in a bit of a funk. At the close of business Thursday evening, the Moody's rating agency downgraded its long-term credit ratings of 15 big banks in the United Kingdom, Canada, Europe and the United States, including Citgroup, Bank of America and Morgan Stanley.
Here's how Moody's explained its stunner, which came after the U.S. markets closed, though not before the Standard and Poors 500 Index had dropped 2.2 percent on rumors that the bad news was coming:
“All of the banks affected by [Thursday's] actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities. However, they also engage in other, often market-leading business activities that are central to Moody’s assessment of their credit profiles. These activities can provide important ‘shock absorbers’ that mitigate the potential volatility of capital-markets operations, but they also present unique risks and challenges."
Analysts are forecasting that banks will be forced to work even harder to restore confidence but, in the short term, expect more volatility on domestic and global markets.