S&P 500 depreciates Barclays, Credit Suisse, Deutsche Bank ratings

Standard & Poors has cut ratings of three major European banks Barclays, Credit Suisse and Deutsche Bank. The new financial politics by Central Bank for safer banking system and uncertain economy conditions pose a threat to the system.

Long-term credit ratings for the three banks were cut to A from A+, the benchmark said yesterday in a statement, pointing out the rising uncertainty around the investment banking model. The company also affirmed its “A” long-term rating and “A-1” short-term rating on UBS AG, according to the statement. The outlook for all four companies is stable.

“We believe industry risk for banks with large capital market operations has increased and is unlikely to abate in the medium term”, the agency stated.

Global banks are facing a variety of new regulations across a number of jurisdictions, including the Basel III rules on capital. US banks have been recently forced to comply with that regulations causing a wave of critics from bank officials. It is believed that new regulations would be implemented as soon as January.

Barclays has been pressured from the UK’s Prudential Regulation Authority to meet stricter capital requirements. Along with Deutsche Bank, both are likely to be among the most effected by new US Federal Reserve proposals governing foreign banks operating in the US.

S&P rates the outlook for all three banks as “stable”, but mentioned an upgrade for Deutsche or Barclays within the next two years was currently a “remote possibility”.

“Barclays, Credit Suisse, Deutsche Bank, and UBS are among the most exposed in Europe to a combination of regulatory initiatives being undertaken globally on capital market-related businesses,” S&P said in the statement cited by Bloomberg.

As a comparison to S&P 500 rival agency Moody’s has similar ratings for Barclays and Deutsche banks as “A2”, equivalent to S&P’s “A”. However, Moody’s has a “negative” outlook for Barclays, and rates Credit Suisse as “A1”, equal to “A+” at S&P.