Potential downgrades of banks including Morgan Stanley and UBS, which could have their credit ratings cut by Moody’s Investors Service to the lowest level ever, threaten to shake up Wall Street’s balance of power.
Morgan Stanley and UBS may be lowered three grades, Moody’s said Feb. 15, and Citigroup Inc. and Bank of America Corp. could join Morgan Stanley at Baa2, two levels above junk. The cuts would raise funding and collateral costs, making the lowest-rated firms less desirable counterparties in over-the-counter derivatives trades, according to analysts and executives.
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