Fitch Ratings dropped long-term bond ratings one notch for UBS AG and two notches for both Royal Bank of Scotland and Lloyds Banking Group.  Seven other financial institutions were placed on a watch list and are under review for possible downgrades.  Those 7 are:  Barclays Bank Plc , BNP Paribas , Credit Suisse Group AG , Deutsche Bank AG , Societe Generale , Bank of America Corp , Morgan Stanley and Goldman Sachs Group Inc. Exposure to the European debt crisis and concern about the business model of pure-play investment banks were catalysts for most of the ratings actions, Joo-Yung Lee, a managing director in Fitch's financial institutions group, told Reuters.  He added:

"Some of these banks have greater reliance on wholesale funding and greater reliance on what we view as volatile trading earnings.  That's particularly true of Goldman Sachs and Morgan Stanley in the U.S. They are less diverse than their global universal bank peers."

In the case of Bank of America, its exposure to mortgage-related litigation was a driver for Fitch's review.  Competitors like Wells Fargo & Co and JPMorgan Chase & Co were not targeted because they have diverse business models, steady funding streams and no company-specific issues that put them at serious risk, Lee said. Fitch does not have a specific deadline to finish its review, but Lee said it hopes to resolve the matter quickly to reduce market uncertainty.   [Reuters, 10/13/11]