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S&P Downgrades Major US Banks

Several banks' credit ratings took a hit under S&P's new system.

A new set of criteria from Standard & Poor's led to decline of 15 of the country's major banks' ratings, including those of Barclays, Goldman Sachs and Bank of America.

BoA could be especially hard-hit, according to CBS, as the bank has already fallen 60 percent in 2011

A new set of criteria from Standard & Poor's led to decline of 15 of the country's major banks' ratings, including those of Barclays, Goldman Sachs and Bank of America.

BoA could be especially hard-hit, according to CBS, as the bank has already fallen 60 percent in 2011 and "remains mired under a cloud of legal issues associated with its ill-fated purchase of Countrywide."

Reuters notes that the reason for the change was solely because of the different rating system, but says that the downgrades will nonetheless have "a real impact on funding costs for the sector."

Additionally, investment banks could feel the pinch of downgrades if other financial institutions have to put up more collateral in derivative trading, as the process for making interest rate or credit default swaps would be more expensive.

The European debt crisis is also continuing to have negative consequences for the markets, as Reuters reports Moody's was considering slashing the ratings of some European banks. The possibility of more expensive derivatives trading will be particularly burdensome for European banks that are already short on cash, the source added.  

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