HONG KONG, Oct 10 (Reuters) - Moody’s Investors Service has warned it may cut the long-term debt ratings of Morgan Stanley (MS.N) and Goldman Sachs (GS.N) as well as those of their units, in a sign the global financial crisis is deepening.
The rating agency said it had placed Morgan Stanley’s A1 rating on review for a downgrade while assigning a negative outlook to the Goldman Sachs Aa3 rating.
Lower ratings would increase the cost of borrowing for the two banks.
The warnings came even as governments across the world pledged public funds to shore up the capital of banks, as credit markets remained in deep distress amid a financial crisis which is now almost a month old.
Just ahead of the Moody’s announcement, Mitsubishi UFJ Financial Group (8306.T), Japan’s largest bank, said it had no plans to pull out of a planned $9 billion investment in Morgan Stanley despite the Wall Street bank’s shares losing a quarter of their value on Thursday alone.
The rating agency’s actions do not come as a surprise given the cataclysmic change in the landscape on Wall Street.
Late last month, Goldman Sachs and Morgan Stanley stunned Wall Street when they became commercial bank holding companies after worries grew about their ability to fund themselves and investors lost confidence in their high-risk brokerage model.
Morgan Stanley declined to comment and Goldman Sachs spokesmen in the United States could not immediately be reached for comment.
Becoming bank holding companies gives the two firms access to federally insured deposits but also subjects them to greater regulatory scrutiny.
Goldman has unveiled deals to raise $15 billion from Warren Buffett’s Berkshire Hathaway (BRKa.N) and public investors. (Reporting by Umesh Desai; Editing by Nick Macfie)