Fitch Ratings says U.S. government financial support for banks is declining and argues that future bailouts will likely be restricted to just eight lenders it regards systematically important.
In a report issued Thursday on the prospect for future government aid to troubled banks, Fitch concludes that only Morgan Stanley, Goldman Sachs Group Inc., Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., JP Morgan Chase & Co., State Street Corp. and Wells Fargo & Co. are candidates for government financial support.
Fitch has a support rating floor for these banks of "A," down from "A+."
The ratings firm notes that bank regulators are looking to establish rules that remove government bailouts for troubled banks.
It sees no potential for government support of domestically focused U.S. banks.
Fitch believes that while untested, the government has a framework to deal with the failure of large regional banks without support or disrupting the market.
But applying the same approach to the largest and most globally connected banks won't work without also creating unwanted ripple effects, Fitch contends.
Still, Fitch notes that the issue of which bank is "too big to fail" cannot be solved rapidly and without increased global cooperation, particularly given the volatile state of financial markets.
So the firm says it expects new legislation and programs will remain focused on eliminating bank bailouts.