Fitch downgrades major banks

Ratings agency Fitch has downgraded a bunch of major international banks.

Steve Chiotakis: The ratings agency Fitch has slashed the credit scores of some of the world's biggest banks -- among them Bank of America, Goldman Sachs, Barclays and Deutsche Bank.

Marketplace's Stephen Beard has that story.

Stephen Beard: The big banks face a sea of troubles. The eurozone debt crisis is just part of the problem. That's made it difficult for banks to borrow -- and therefore lend -- in Europe.

Then there's the slowing global economy. That means less activity and lower revenues for the banks. And piling on the agony, the regulators have tightened banking rules, making the business less profitable.

Peter Thal Larson of the financial website Breaking Views:

Peter Thal Larson: All those factors are kind of weighing on the big banks . That pushes up the cost of credit for banks and obviously also makes them more risky as far as the credit rating agencies are concerned.

But the backlash against the credit rating agencies continues to grow. They stand accused of being part of the problem, of worsening the downturn with their downgrades.

A prominent Swiss economist says companies and countries should be able to sue the agencies for damages. When countries and companies suffer a cut in their credit rating, they can lose billions of dollars.

In London, I'm Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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Lesson learned: No one is above risk and risk is not efficiently mitigated simply by collecting large sums of money in the form of fees. For instance, in order to reduce traffic accident fatalities is it more efficient to build safer cars and highways or just collect more insurance money? It seems like the financial industry (banks, insurance companies, and credit rating agencies) have forgotten that the bottom line is not a dollar amount. The bottom line is actually a complex relationship between costs and results. If someone (credit agency) claims to be an assessor and thus a mitigater of financial risk, their work product better actually provide an engineered solution that actually does what is claimed. But unfortunately for high earning financial types, this type of work requires more effort which drives down profits and thus bonuses and salaries. It is also outside their area of expertise as it falls more under the domain of the engineering school than the business school. What do we have to do to get these people out of their silos and get them working with the rest of us again (at rates more comparable to the rest of us)?!! Financial products are not independent of other realities in the world and in many cases are a massive over simplification of the problem trying to be solved.

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