Goldman Sachs rating downgraded to negative

7 May 2010

Investment bank Goldman Sachs’ has had its rating downgraded from stable to negative by Fitch Ratings.

Recent legal issues faced by the financial services provider and changes to the regulatory landscape are the main reasons for the move, the agency explained.

Goldman Sachs’ A+ and F+ long-term default ratings were reaffirmed due to its strong liquidity, balance sheet and global presence within capital markets.

However, Fitch stated that the recent filing by the Securities and Exchange Commission, which accused the bank of deliberately misleading investors over an investment product related to subprime mortgages, had threatened the institution’s standing.

In a statement, quoted by Business Week, Fitch said: “The rating outlook revision to negative incorporates recent legal developments and ongoing regulatory challenges that could adversely impact Goldman’s reputation and revenue generating capacity.”

“For financial services companies, particularly those dependent on the capital markets, reputation is critically important.”

The organisation also listed changes to regulations which could threaten the bank’s rating.

Increased capital requirements, restrictions on proprietary trading and the centralised clearing of derivatives were all cited as potential future problems for Goldman Sachs.

By Jim Ottewill

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