Times got even tougher for some of the world's largest banks on Thursday as Moody's Investors Service downgraded the credit ratings of 15 institutions in the US and Europe. Included in the list of downgraded banks were The United States two biggest, JP Morgan Chase and Bank of America, and Wall Street firm Goldman Sachs. Some of the larger European banks that were affected are Barclay's, Deutsche Bank and HSBC. Moody's cited growing concerns about the bank's ability to repay existing debts for the widespread action.
The downgrades were not entirely unexpected, given that Moody's had warned in February that it was considering the move, but that expectation won't take the sting out of the move for the banks, whose borrowing costs will grow significantly as a result. Of course, analysts downplayed the impending impact of the downgrades on stock markets, saying that the expectation of the downgrade has already done the damage. Also, with interest rates already near historic lows, the borrowing costs for the banks will only grow by a certain amount.
Even before Moody's latest round of downgrades, stock markets had suffered considerable losses in Thursday's session on disappointing reports about US manufacturing and initial jobless claims. With the ongoing sovereign debt crisis as big a threat as ever to the global economy, and even rapidly growing economies like China and Brazil slowing, economists and investors alike are concerned about another global recession. The Dow Jones fell some 251 points on Thursday, all before the downgrade announcement from Moody's which came after the closing bell.