Global banks still under capitalised and over leveraged, says Moody's

Moody’s has warned that it could downgrade 17 global banks in June and issued a warning that their continued avoidance of capital requirement rules created serious ‘vulnerabilities’.

In an interview with the Financial Times, Moody’s chief credit officer for financial institutions Mark LaMonte said major banks continued to be reliant on excessive leverage and inadequate capital.

‘These firms are constantly moving into and out of new products,’ said LaMonte. ‘The regulatory rules around risk weighting may not be able to keep up with them.’

Moody’s is due to complete its review of the 17 global institutions in June. Three – Credit Suisse, Morgan Stanley and UBS – could see their credit worthiness reduced by as much as three notches. Ten face a two-notch downgrade, while the remainder are facing one-notch downgrades.