Moody's tilts playing field towards safe haven banks

[BlueToTheBone]

http://www.reuters.com/article/2012/06/22/us-financial-moodys-downgrades-idUSBRE85K1QL20120622?feedType=RSS&feedName=topNews&rpc=71&google_editors_picks=true

(Reuters) - Downgrades by ratings agency Moody's will make funding more expensive for banks that rely the most on capital markets, while reinforcing the competitive advantage of "safe haven" banks that can fund themselves from stable customer deposits.

Stock markets took Moody's announcement that it had downgraded 15 of the world's biggest banks in their stride, as the rating agency's lowering by up to three notches had been widely anticipated.

European bank shares rose just under 1 percent. But longer-term, the downgrades could have a lasting impact.

But over the medium term, the downgrades will reinforce a trend that has seen weaker banks punished for their risk taking, while stronger banks are rewarded for conservative funding models, ensuring lower costs and higher margins.

Not only will funding costs rise for the worst-rated banks, but trading partners are bound to ask for more collateral - and steer business to those perceived to be financially stronger.
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HSBC, Royal Bank of Canada and JP Morgan were their top tier banks.