Moody’s Cuts Ratings of Four Big Banks

LONDON â€" The rating agency Moody’s lowered its credit ratings late Thursday for four major United States banks, including JPMorgan Chase and Goldman Sachs, reflecting a belief that the institutions wouldn’t receive the same level of government support in another financial meltdown.

Moody’s said that there is less likelihood of a widespread bailout of banks by the United States government as there was during the financial crisis five years ago and that bank debt holders would be forced to shoulder more of the losses in the future.

However, the rating agency said it expects banks will be required by regulators in the United States to hold a higher level of capital, which will likely result in higher recoveries for creditors in any future bank default.

In its report Thursday, Moody’s lowered by one notch the holding company ratings for Morgan Stanley, Goldman Sachs, JPMorgan and Bank of New York Mellon. The rating agency also confirmed the holding company ratings for Bank of America, Citigroup, State Street, and Wells Fargo.

“Rather than relying on public funds to bail-out one of these institutions, we expect that bank holding company creditors will be bailed-in and thereby shoulder much of the burden to help important subsidiaries in a stress scenario,” said Robert Young, a Moody’s managing director.

“As a result, the holding company creditors of systemically important US banks are unlikely to receive government support, signaling a higher risk of default.”

Under the Dodd-Frank Act, the Federal Reserve has been limited in its ability to provide taxpayer funds to individual banks, and failing banks would be wound down in a so-called orderly liquidation, in which creditors would bear the bulk of the burden of the losses.

However, some critics have expressed doubts that regulators could handle the liquidation of one or more of the nation’s largest banks in a severe financial crisis.

In June, ratings rival Standard & Poor’s made a similar move. It cut JPMorgan’s credit-trading outlook to negative, bringing its outlook in line with other banks that it believes are “systemically important,” including Bank of America and Goldman Sachs.

S.&P. said at the time that it was “clear” that large banks may not receive the same level of government support in another crisis.

The United States government pumped hundreds of billions of dollars into the nation’s largest banks and other financial institutions it deemed “too big to fail” at the height of the financial crisis in 2008. Much of that money has been paid back.