Moody’s downgraded the investment bank by one notch
Moody's Investors Service cut its long-term ratings of investment bank Morgan Stanley by one notch. Moody’s said the rating reflected the banks risk management miscues and a loss of confidence in its risk controls.
Moody's cut Morgan Stanley's rating to A1, the fifth-highest investment grade, from Aa3. The outlook is stable.
Over the past year, excluding recent gains from asset sales and credit spread widening on its own obligations, Morgan Stanley has reported a pretax loss of about $3bn.
“The size of trading losses in the past year has reduced our confidence in Morgan Stanley's risk controls.
Peter Nerby, a Moody's senior vice president
"The size of trading losses in the past year has reduced our confidence in Morgan Stanley's risk controls - this is the primary driver of the downgrade," said Peter Nerby, a Moody's senior vice president
Morgan Stanley took on positions that proved difficult to unwind when markets became volatile and illiquid and produced a high levels of earnings volatility, observed the rating agency.
Morgan Stanley reported pre-tax earnings of $3.8bn for the six months ending May 31, 2008.