Ratings agency Standard & Poor's has downgraded the long-term credit grades of 37 financial institutions worldwide. Among those who suffered the cut are Wall Street titans such as Bank of America, Goldman Sachs, JP Morgan and Morgan Stanley. Alongside are other established names like London-based Barclays, HSBC, and UBS.
S&P said its move reflects new criteria for banks, based on changes in market trends and government support. It evaluates banks based on economic and industry risks, bank-specific strengths and weaknesses, as well as "likelihood of external government or group support."
Downgrade is damaging for the banks as it can increase their borrowing costs and put further pressure on their shaky finances. BOA shares has dropped to a new low on concerns of its financial stability to withstand another downturn in the U.S. economy or further trouble in Europe. We are also concerned whether this will lead to another credit crunch as banks brace themselves for another round of recession.
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