ABN Amro falls from Moody’s grace
Dutch bank part of 44 losers in new system
Moody’s Investors Service cut the credit ratings of 44 banks, including units of ABN Amro Holding NV, ING Groep NV and Fortis, to calm protests over a new system for assessing financial institutions.
The downgrades were made about six weeks after Moody’s raised 150 banks it said could count on government support in a financial crisis. The new system provoked a furore when Iceland’s three largest banks were given the same rating as the US Treasury and ExxonMobil Corp.
“It’s a step in the right direction,” said Tom Jenkins, an analyst at Royal Bank of Scotland Group Plc in London, who wrote a report last month titled Moody’s lose the plot completely. “It’s going to be some time before Moody’s credibility in terms of bank ratings is fully restored,” Jenkins said.
Moody’s, whose founder John Moody created the first credit ratings for US railroad bonds in 1909, was forced to reverse upgrades for banks after criticism from firms including Merrill Lynch & Co. and JPMorgan Chase & Co. Eighty-five per cent of investors in a Merrill survey last month said Moody’s had lost credibility because of the approach.
Icelandic lenders Kaupthing hf, Glitnir Banki hf and Landsbanki Islands hf had some of the biggest ratings cuts, dropping three levels to Aa3. Three steps was the largest downgrade Moody’s said it was considering for the banks it placed under review earlier this month.
OTP Bank Nyrt, a Budapest-based bank that is eastern Europe’s largest lender by assets, was also cut, to Aa3 from Aa1. In February, Moody’s raised its A1 local bank deposit rating three steps to Aa1, justifying the ranking by saying some governments are willing to pay off bank debt before sovereign obligations to prevent a crisis.
“A number of bank ratings that were upgraded prior to the refinement were identified as being inconsistent with the refined methodology,” Moody’s said in a statement.
ABN Amro Bank NV was lowered to Aa2 from Aa1, and ING Bank was cut to Aa1 from Aaa. Fortis Bank was reduced to Aa2 from Aaa.
The revised ratings are “still generous but they don’t look as bizarre as they did,” said Simon Adamson, an analyst at CreditSights Inc in London. “We’ll probably be able to use them again.”