This could be the big week when Moody's Investors Service goes after the credit ratings of global capital market banks. On the chopping block are 17 global banks, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley.
The downgrades of global bank ratings would essentially eliminate appetite for asset backed commercial paper tied to those ratings. Many of the users today of ABCP are European banks, said one market source who declined to be named . "If Moody's downgrades me by the end of the week and I go from 'P1' to 'P2', I will go out of business," he said.
Potentially there will still be two other tier one ratings to be had by Fitch Ratings and Standard &Poor's, but money market funds, which are big buyers of ABCP, are mostly rated by Moody's. "These Moody's, triple-A rated funds, have virtually no tolerance to 'P2' rated investments and SEC rules don't allow for anymore than a token amount of tier 2 commercial paper," said the market source.