S&P lifts ratings on four U.S. banks

S&P said it raised the issuer credit ratings on the core and highly strategic operating subsidiaries of Bank of America Corp., Citigroup Inc., Morgan Stanley and the Goldman Sachs Group Inc.

The agency also said it raised the ratings on the senior unsecured debt of these entities by one notch.

S&P also said it removed all of the ratings from CreditWatch with positive implications.

The outlooks are stable.

The ratings and outlooks on these four banks’ non-operating holding companies are unchanged.

There are no changes to the ratings and outlooks on the non-operating holding companies and core and highly strategic operating subsidiaries of the four other U.S. global systemically important banks: Bank of New York Mellon Corp., JPMorgan Chase & Co., State Street Corp. and Wells Fargo & Co.

The actions reflect a revised assessment of the additional loss-absorbing capacity (ALAC) of Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs following the final total loss-absorbing capacity (TLAC) rules, which the Federal Reserve released Dec. 15, S&P said.

The Federal Reserve’s TLAC rules require banks to maintain (at their non-operating holding companies) minimum levels of capital and long-term debt that can be bailed in to absorb potential losses from subsidiaries and to recapitalize the operating companies, the agency explained.

This aims to limit the systemic impact that the failure of a single institution might have on financial markets while also avoiding taxpayer support of these systemically important banks, a cornerstone of the U.S. Bankruptcy Code and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, S&P said.

Bank of America’s A/A-1 ratings were upgraded to A+ and A-1. Bank of New York Mellon’s AA-/A-1+ were upgraded to AA-/A-1+. Citigroup’s A/A-1 ratings were upgraded to A+A-1 and Goldman Sachs’ A/A-1 ratings were upgraded to A+/A-1.

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