Moody's on Thursday cut its credit grades for eight Brazilian banks, saying they should not be rated significantly higher than the government in a global environment that has governments backstopping financial institutions.
The banks' "standalone financial strength ratings" fell by one to three notches, mostly to line up at or just one level above Moody's Baa2 rating for Brazil.
"Today's rating actions took place in the context of Moody's ongoing global review of all banks whose standalone assessments are higher than the rating of the country in which they are domiciled," Moody's said.
Following the financial crises in the United States and Europe, in which governments have been forced to rescue major banks, taking on their liabilities in some cases, Moody's has been adjusting banks' credit grades where it sees they should not be higher than the governments where they operate.
Moody's did not say that the banks' own operations had weakened significantly, but did refer to the sharp slowdown of Brazil's economy and the potential impact on the banks, especially those reliant on capital markets for funding.
"Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis. More particularly, we note their significant direct exposure to the Brazilian government securities," it said.
Included in the downgrades to at or near the level of the government were Banco do Brasil, Banco Safra, Banco Santander (Brasil), HSBC Bank Brasil, Banco Bradesco, Banco Itau Unibanco, Banco Itau BBA and Banco Votorantim.
Votorantim was lowered to one notch below the government's "to reflect the bank's poor financial performance, including weak asset quality and profitability, and the prospects of ongoing challenges to its financial strength."
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