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'Worst-Case Scenario' Bank Downgrades Unlikely: Analyst
CNBC.com | February 16, 2012 | 04:09 PM EST

Moody’s will likely downgrade some of the credit ratingsof 17 global and 114 European financial institutions, but the downgrades likely will not result in a worse-case scenario, one analyst told CNBC.

Jeffery Harte, a bank analyst at Sandler O’Neill, said Moody's warning on Thursday did not include "a lot of new news" since the market has been worried about regulation and a weak capital markets environment for a while now.

“The real question, though, is not what are the risks — they have been clearly identified and are well known,” Harte said. “It's how can a company like Goldman Sachs or Morgan Stanley manage those risks? And I think that's where we may not see as big of a downgrade as some of the reports are suggesting because I think they’re getting pretty good at managing some of those risks.”

He called a potential three-notch downgrade of Morgan Stanley “a worst-case scenario” — but one that he does not envision occurring.

Such a large downgrade would have a direct imact on the company, he said. Depending on whether it is long-term or short-term, a downgrade would hurt a bank's funding costs and would also hurt how credit worthy the bank is viewed by counterparties, resulting in the need for more collateral.

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