Moody’s to Review ‘Too Big’ Banks

Spooked by speculation that the federal government may withhold bailout funds from banks deemed ""too big to fail"" in another crisis, ""Moody's Investors Service"":http://www.moodys.com/ placed the debt ratings for three leading banking institutions under review in June, according to NASDAQ.com.

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The ratings agency said that the reviews will assess deposit, senior debt, and senior subordinated debt ratings. If lowered, the new ratings would downgrade the banks' reputation as financially solvent institutions, diminishing their abilities to borrow large sums and meet bottom lines.

In explaining the reviews, Moody's said that the institutions ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô ""Bank of America"":https://www.bankofamerica.com/, ""Citigroup"":http://www.citigroup.com/citi/homepage/, and ""Wells Fargo"":https://www.wellsfargo.com/ ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô had received federal support that boosted their ratings 3-4 notches above average, inflating capital reserves and making it less likely for the institutions to weather another crisis absent federal intervention.

Representatives for the banks could not be reached for comment.

The U.S. federal government cobbled together the Troubled Asset Relief Program (TARP) to rescue the three banks, plus ""Goldman Sachs"":http://www2.goldmansachs.com/?cid=PS_01_05_06_99_01_01, during the worst stages of the credit crunch in 2008. Funding that remains in place may overstate quarterly and annual earnings, the investor service said.

The new Dodd-Frank regulatory framework puts in place various agencies and over 387 provisions, half of them unwritten, which prescribe new limits and conditions for ""big"" banks.

More recently, federal regulators issued guidelines requiring annual stress tests for banks with assets totaling more than $10 billion. With ""Bank of America"":https://www.bankofamerica.com/, Citigroup, and ""Wells Fargo"":https://www.wellsfargo.com/ among the most capital-laden lending institutions in the country, any federal assistance may well distort the outcomes these tests yield for authorities.