Moody's Investors Service has concluded its review of eight large US banking groups. The credit ratings of these banking groups each benefit from the agency's assumption of government support. Today's rating actions reflect strengthened US bank resolution tools, prompted by the Dodd-Frank Act, which affect Moody's assumptions about US government support. Further, today's rating actions consider the changing credit profiles of certain banks.

Moody's acted on the systemic support assumptions incorporated in the ratings of the eight groups as follows: 1) did not change the support assumptions for bank-level senior debt; 2) removed all uplift from US government support in the ratings for bank holding company debt; 3) reduced loss severity assumptions for bank holding company debt; 4) reduced uplift for bank-level subordinated debt. Moody's also aligned the support assumptions for certain systemically important international subsidiaries with those of their primary domestic affiliates.

Moody's lowered the standalone baseline credit assessments (BCA) of Bank of New York Mellon and State Street Bank and Trust, both to a1 from aa3 to reflect the long-term profitability challenges facing these highly-rated custodian banks. The rating agency also raised the standalone BCAs of both Bank of America N.A. and Citibank N.A. to baa2 from baa3 to reflect positive changes in the banks' credit profiles including declining legacy exposures and strengthening capital.

Based on Moody's updated views on US government support and standalone bank considerations, Moody's lowered by one notch the senior holding company ratings of Morgan Stanley, Goldman Sachs, JPMorgan, and Bank of New York Mellon. Moody's confirmed the senior holding company ratings of Bank of America, Citigroup, State Street, and Wells Fargo.

Following these actions, the rating outlooks are stable for all eight bank holding companies and their main operating subsidiaries.

"We believe that US bank regulators have made substantive progress in establishing a credible framework to resolve a large, failing bank," said Robert Young, Managing Director. "Rather than relying on public funds to bail-out one of these institutions, we expect that bank holding company creditors will be bailed-in and thereby shoulder much of the burden to help recapitalize a failing bank."

Moody's announced its review of bank ratings driven by systemic support assumptions on August 22, 2013 https://www.moodys.com/research/Moodys-reviews-US-bank-holding-company-ratings-to-consider-reduced--PR_280779 and its review of the custodian banks on July 2, 2013 https://www.moodys.com/research/Moodys-places-BNY-Mellon-Northern-Trust-and-State-Street-on--PR_276281.

A further discussion of the rating drivers for each bank/debt type follows the list of rating actions below. Moody's has also published answers to frequently asked questions, available on its website at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_160290

RATING ACTIONS (alphabetically)

The following are major entities and their primary debt classes:

Bank of American Corporation -- Long-term senior unsecured debt confirmed at Baa2, subordinated debt confirmed at Baa3, outlook stable; Short-term Prime-2 confirmed

Bank of America (NYSE: BAC). -- Long-term deposit rating upgraded to A2 from A3, subordinated debt confirmed at Baa1, outlook stable; Short-term to Prime-1 from Prime-2

The Bank of New York Mellon Corporation (NYSE: BK) -- Long-term senior unsecured debt downgraded to A1 from Aa3, subordinated debt downgraded to A2 from A1, outlook stable; Short-term Prime-1 affirmed

The Bank of New York Mellon -- Long-term deposit rating downgraded to Aa2 from Aa1, subordinated debt downgraded to Aa3 from Aa2, outlook stable; Short-term Prime-1 affirmed

Citigroup, Inc. (NYSE: C)-- Long-term senior unsecured debt confirmed at Baa2, subordinated debt confirmed at Baa3, outlook stable; Short-term Prime-2 confirmed

Citibank, N.A. -- Long-term deposit rating upgraded to A2 from A3, outlook stable; Short-term to Prime-1 from Prime-2

The Goldman Sachs Group, Inc. (NYSE: GS) -- Long-term senior unsecured debt downgraded to Baa1 from A3, subordinated debt downgraded to Baa2 from Baa1, outlook stable; Short-term Prime-2 affirmed

Goldman Sachs Bank USA -- Long-term deposit rating affirmed at A2, outlook stable; Short-term Prime-1 affirmed

JP Morgan Chase & Co. (NYSE: JPM) -- Long-term senior unsecured debt downgraded to A3 from A2, subordinated debt downgraded to Baa1 from A3, outlook stable; Short-term to Prime-2 from Prime-1

JP Morgan Chase Bank NA -- Long-term deposit rating affirmed at Aa3, subordinated debt downgraded to A2 from A1; outlook stable; Short-term Prime-1 affirmed

Morgan Stanley (NYSE: MS) -- Long-term senior unsecured debt downgraded to Baa2 from Baa1, subordinated debt downgraded to Baa3 from Baa2, outlook stable; Short-term Prime-2 confirmed

Morgan Stanley Bank N.A. -- Long-term deposit rating affirmed at A3, outlook stable; Short-term Prime-2 affirmed

State Street Corporation (NYSE: STT) -- Long-term senior unsecured debt confirmed at A1, subordinated debt confirmed at A2, outlook stable; Short-term Prime-1 affirmed

State Street Bank and Trust Company -- Long-term deposit rating downgraded to Aa3 from Aa2, subordinated debt downgraded to A1 from Aa3, outlook stable; Short-term Prime-1 affirmed

Wells Fargo & Company, Inc. (NYSE: WFC) -- Long-term senior unsecured debt confirmed at A2, subordinated debt confirmed at A3, outlook stable; Short-term Prime-1 confirmed

Wells Fargo Bank, N.A. -- Long-term deposit rating affirmed at Aa3, subordinated debt confirmed at A1, outlook stable; Short-term Prime-1 affirmed

RATINGS RATIONALE -- BANK LEVEL SENIOR DEBT UNAFFECTED

The deposit and senior debt ratings at the bank level benefit from uplift from their baseline credit assessments due to Moody's assumption of a high or very high likelihood of support which remains unchanged. As a result, the bank-level deposit and senior debt ratings of these institutions are one to three notches higher than their standalone credit assessments. Moody's view of support probabilities for these firms remains unchanged because we believe the disorderly failure of one of them would create the risk of contagion to the broader financial system and the economy. What has changed is the source of this financial support. With the single point of entry receivership (SPE) framework more fully developed, Moody's believes that if support were to be provided, it would be derived not from a bail-out by the government, but, in most instances, from the bail-in of holding company creditors. That is, a systemically important bank would still likely be supported, but the FDIC would largely shift the cost of supporting one of these firms from the public sector to the private sector.

RATINGS RATIONALE -- LOWER SUPPORT ASSUMPTIONS AT HOLDING COMPANY LEVEL, BUT LOSSES MITIGATED

As noted in August, the agency's review focused on two opposing effects of the FDIC's SPE framework that influence risks for bondholders at the bank holding company level. The first effect is the reduced likelihood and predictability of systemic support. SPE is designed to allow regulators to restore the solvency of a distressed entity without using public funds. As envisioned by US regulators, the SPE approach would impose losses on US bank holding company creditors to recapitalize and preserve the operations of the group's systemically important subsidiaries in a stress scenario. As a result, the holding company creditors are unlikely to receive government support, signaling a higher risk of default.

The second, opposing effect is the possible reduction in the severity of losses for bank holding company creditors in the event of default ('loss given default', or LGD). Under SPE, holding company creditors will likely face lower losses than in a bankruptcy scenario, for two reasons. First, Moody's expects that US regulators will mandate a minimum level of loss-absorbing capital (equity and debt) at the bank holding company. The larger the amount of debt at the holding company at the point of distress, the lower the LGD for holding company debt. Further, this resolution framework is designed to maintain the systemically important subsidiaries of the banking group as going concerns in order to mitigate systemic risk, preserve franchise value and minimize losses. Therefore, SPE may result in earlier intervention and a more orderly resolution, which may in turn lead to higher recoveries compared with historical US bank and thrift holding company defaults.

RATINGS RATIONALE -- BANK-LEVEL SUBORDINATED DEBT

Moody's reduced the uplift that had been incorporated into the subordinated debt ratings of the eight banking groups' operating subsidiaries. On the one hand, SPE is designed to keep systemically important subsidiaries operating without causing a default on their obligations, including on their subordinated debt. This reflects regulators' objectives in employing SPE, which include mitigating systemic risk, minimizing losses and maximizing the value of a systemically important operating company's business. Support for the operating subsidiaries would come primarily through the resources provided by the "bail-in" of holding company creditors under SPE. However, if SPE failed to ensure the ongoing viability of the operating subsidiaries, we believe subordinated creditors at those subsidiaries would be unlikely to benefit from any direct support the government might chose to provide in order to meet the overarching objective of financial stability.

RATINGS RATIONALE -- SUPPORT ASSUMPTIONS FOR INTERNATIONAL SUBSIDIARIES

The priority under SPE of keeping systemically important subsidiaries operating is the reason Moody's now incorporates support into the ratings of certain international subsidiaries of the eight large US banking groups. Under SPE, since these international subsidiaries are highly integrated and key operating entities, the rating agency believes that regulators would extend support through the SPE process to preserve the value of the overall banking franchise and limit potential contagion. Were support to not flow to these international subsidiaries, that would also put at risk the international cooperation that is necessary to facilitate a coordinated, orderly resolution of one of these groups. Therefore, we expect that they would benefit from a level of support similar to that of their key US affiliates.

RATINGS RATIONALE -- STANDALONE RATING ACTIONS

Bank of America

The upgrade of Bank of America's (BAC) baseline credit assessment to baa2 from baa3 reflects the bank's improved capital position, reduced tail risks, and declining expenses. The bank has reached settlements on a variety of legal fronts, reducing the risk of more severe litigation losses. While BAC remains exposed to additional litigation risk, BAC's strengthened capital leaves it better positioned to absorb related tail risks. In addition, the risk of significant additional losses on the bank's mortgage and home equity portfolio has declined as the portfolio has shrunk and asset quality has improved. Finally, declining mortgage servicing costs and ongoing efficiency initiatives are likely to improve profitability over the next few years. Stronger, more consistent earnings from BAC's core banking franchises should provide thicker shock absorbers to protect creditors from the potential volatility and inherent risk opacity of the bank's sizeable global capital markets business.

Citigroup

The upgrade of Citigroup's baseline credit assessment to baa2 from baa3 reflects the bank's stronger balance sheet, improved profitability and reduced earnings volatility. Further, capital has been strengthened through earnings retention, while asset quality metrics have improved through continuing run-off of the legacy portfolio. Since 2009, Citigroup's earnings are becoming somewhat less volatile, as the US economy has recovered and as the firm has avoided costly risk control breakdowns. The rating agency expects this track record to continue as the firm installs a more conservative risk management culture and a more independent risk control function. However, Citigroup remains reliant on global capital markets businesses to generate satisfactory shareholder returns and will remain one of the world's most complex banks. Therefore, future increases in the standalone credit assessment are unlikely absent a material re-balancing and simplification of the business mix.

Bank of New York Mellon & State Street

The downgrade of Bank of New York Mellon and State Street's baseline credit assessments to a1 from aa3 reflects their profitability pressures. Specifically, protracted low interest rates and the challenging global operating environment have exposed vulnerabilities in the trust and custody banks' business models and revealed the mispricing of their largest custody relationships. Although both banks are engaged in broad efficiency initiatives that will somewhat offset their profitability pressures by leveraging technology, transforming core processes and generally reducing expenses, the rating agency does not expect an enduring competitive advantage to emerge for either of them. This reflects the fact that much of the industry is engaged in similar efficiency initiatives as well as the difficulty associated with re-pricing the banks' largest custody relationships. In addition, both firms face potential earnings volatility from litigation risk associated with foreign exchange activities and securities lending, although a number of individual cases have already been resolved.

Notwithstanding the downgrade, both banks enjoy comparatively high baseline credit assessments based on their huge global custody and investment-servicing franchises, where the barriers to entry are high and the secular trends are favorable. They also have large, though less dominant, asset-management businesses.

The principal methodology used in ratings of Citigroup Inc., Wells Fargo & Company, State Street Corporation, Bank of America Corporation, and Bank of New York Mellon Corporation (The) was Global Banks Methodology published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The principal methodology used in ratings of Goldman Sachs Group, Inc. was Global Securities Industry Methodology published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The methodologies used in ratings of JPMorgan Chase & Co. and Morgan Stanley were Global Banks Methodology published in May 2013, and Global Securities Industry Methodology published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.