Bank ratings to remain the same, S&P states

27 May 2010

The ratings of four of the largest banks are not likely to see an immediate change following the regulatory overhauls proposed by the US Senate.

According to Standard & Poor’s (S&P’s), the ratings of Goldman Sachs, Bank of America, Citigroup and Morgan Stanley should stay the same, at least until further details of the legislation have been agreed on.

John Bartko, S&P analyst quoted by Bloomberg said: “We do not expect [the bill's] effect, if any, on the ratings of financial institutions to be clearer until more information is available concerning implementation details and transition issues.”

“This assessment could take several months, even after the bill is passed into law," he added.

The new bill is expected to see financial institutions be forced to take more responsibility for their actions in a bid to prevent the markets being exposed to risky investments.

Among the proposals is a ban on proprietary trading as part of the so-called ‘Volcker Rule’ and the introduction of a new regulatory body to monitor more closely institutions involved in potentially destabilising trades.

Commenting following the vote on introducing the changes, US President Barack Obama said: “Our goal is not to punish the banks but to protect the larger economy and the American people.”

The Senate voted 59 to 39 in favour of introducing the bill.

By Jim Ottewill

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