Indictments may hurt Wall Street bank rtgs-Moody's
NEW YORK, May 6 (Reuters) - Moody's Investors Service on Monday said that investigations of investment banks that lead to criminal indictments could result in rating cuts.
Moody's has already warned that a criminal indictment of Merrill Lynch & Co. Inc. (NYSE:MER - news) could lead to a one-notch downgrade of the No. 1 U.S. full-service brokerage's "Aa3" senior debt rating, its fourth highest investment grade.
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"The financial strength of the firm, the exact nature of the charges, the importance of the operations affected, and the extent that the firm is 'singled out' will be important determinants of any rating action," Moody's said. Negative actions, which can increase borrowing costs, include "outlook" changes, reviews for downgrades, and actual downgrades.
New York State Attorney General Eliot Spitzer is investigating whether Wall Street analysts issued overly bullish research reports to win investment banking business. Spitzer is negotiating a final settlement with Merrill and hasn't ruled out criminal charges if talks collapsed.
Moody's has issued the following ratings on Wall Street firms' senior unsecured debt: Bear Stearns Cos. Inc. (NYSE:BSC - news), "A2"; Credit Suisse Group Inc. (CSGZn.VX) unit Credit Suisse First Boston, "Aa3"; Goldman Sachs Group Inc. (NYSE:GS - news), "A1"; Lehman Brothers Holdings Inc. (NYSE:LEH - news), "A2"; Morgan Stanley (NYSE:MWD - news), "Aa3," and Citigroup Inc.'s (NYSE:C - news) Salomon Smith Barney Holdings unit, "Aa1."
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