S&P downgrades HSBC, Citi, UBS, Barclays and other top banks
Posted on 30 November 2011 with 2 comments from readers
Standard & Poor’s sent bank stock futures lower on Wednesday with a downgrading of dozens of the world’s top banks including some active in the Gulf States such as HSBC, UBS, Lloyds, JP Morgan, Citi and Barclays.
The banks still retain ratings that place them well within investment grade but this is a mark of the gradual contagion of the eurozone sovereign debt crisis throughout the world and again ratchets up the cost of credit.
By contrast S&P upgraded two of China’s largest banks, the Bank of China and China Construction Bank. This reflected the still positive growth outlook in China although concern has been rising there about the shadow banking sector and falling house prices.
Chinese stocks plunge
Ironically Chinese stocks fell the most in four months after the announcement because of warnings about the maintenance of tight monetary policy and a plunge in export growth.
Many of the global banks downgraded were not happy with the move and felt their spread of business was being inaccurately assessed for credit risk.
S&P is doubtless more worried about getting things wrong again with ratings as it did so disastrously in 2008 than worrying over some finer points of detail. It may be making a pre-emptive strike on ratings now which can always be reversed if the eurozone gets its act together.
That remains a forlorn hope with officials unable to put a size on the stability fund yesterday and Italy paying 7.9 per cent on its bond issue, the highest yield for 15 years. The drift is still into a major banking crisis and S&P knows that only too well.
2 Comments posted by readers:
I guess that the gradual eurozone contagion is producing a gradual downgrading of these and other banks. If the eurozone contagion switches to catastrophic, I presume that there will be a catastrophic downgrading of these and other banks.
I have dealt with my concern about having all my “deposited” currency taken away from me by my bank by running an overdraft, so that the bank is always owed by me and not the other way round. Each month, I cream off my pension on pay day and put it into my GoldMoney cash account to wait for the right moment to buy more silver.
I am reckoning that the overdraft cost will be more than exceeded when silver rises high in due course. In the meanwhile, however, I won’t be losing a single dime to my bank if they go belly-up.
As the Editor says, “the drift is still into a major banking crisis” which S&P knows only too well, and I am NOT going to be on the wrong side of that crisis.
Did anyone look at the stocks this morning…? Everything is up. Let’s see when it goes down like it’s supposed to.