On June 27, Fitch downgraded its assessment of the US banking industry's operating environment from AA to AA-, citing "gaps in the regulatory framework and structural uncertainty around the normalization of monetary policy." Another downgrade would force Fitch to re-evaluate all of the lenders it covers, the analyst said.
“If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions,” Wolfe clarified.
Wolfe explained that the main problem with a recalibration of ratings would be that the industry’s score would be lower than their top-rated lenders. Thus, financial institutions such as JPMorgan and Bank of America would fall to AA- from A+, as banks cannot have higher ratings than the environment they operate in.
The analyst declined to speculate on the timing of the potential move, nor would he comment on the impact it could have on lower-rated firms.
In late June, Fitch Ratings announced that it downgraded the credit rating of the United States from AAA to AA+, citing "a steady deterioration in standards of governance." The rating agency also said that it found troubling the debt limit standoffs between the two major political parties in Congres, despite their last-minute resolutions to avoid a debt default.