Moody’s Ratings on Monday downgraded the long-term ratings of several of America’s largest banks, including JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), and  Wells Fargo  & Company (NYSE:WFC), citing weakened prospects of federal support following Friday’s U.S. sovereign downgrade. The move marks a rare blow to the top tier of the U.S. financial system and may raise borrowing costs and regulatory pressure on institutions still seen as systemically important.

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The rating agency lowered deposit ratings, senior unsecured debt, and counterparty risk assessments for key subsidiaries and branches of the banks to Aa2 from Aa1. These ratings had previously included a notch of uplift tied to the government’s Aaa rating, support Moody’s no longer deems as fully credible following the downgrade of U.S. sovereign debt to Aa1.

“The downgrade of the US Government’s rating indicates that it has less ability to support the US’s global systemically important banks,” Moody’s said. “The ratings and assessments downgraded in today’s action all previously incorporated one notch of US Government support uplift and this notch of support has now been removed.”

JPMorgan Chase, the largest U.S. bank by assets, maintained a positive outlook despite the downgrade, reflecting its dominant capital position and franchise strength. “These positive outlooks continue to reflect the commanding position of JPM’s franchises… and JPM’s strong capital levels,” Moody’s noted, signaling potential future revision upward should fundamentals remain strong.

Bank of America and Wells Fargo now carry stable outlooks on their long-term deposit and senior unsecured ratings, down from negative, aligning with their broader financial profiles. Moody’s said their ratings reflect moderate government support assumptions but also individual metrics such as profitability, capital buffers, and risk management practices.

Other major banks, including Bank of New York Mellon (NYSE:BK) and  State Street  Corp (NYSE:STT), also saw downgrades to parts of their debt structure, yet remained at the high end of Moody’s rating scale.  Citigroup  Inc (NYSE:C),  Goldman Sachs Group  Inc (NYSE:GS), and  Morgan Stanley  (NYSE:MS) were notably excluded from the action, having previously shed their sovereign-linked rating uplift and retaining stable outlooks.

While Moody’s affirmed the “Strong+” macro profile of the U.S. banking sector, the recalibration of sovereign support could impact market perceptions of the safety net underpinning the nation’s financial system. Analysts warn the immediate financial cost may be limited, but institutional funding dynamics and capital planning could face growing scrutiny.

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Monday’s downgrades underscore the interconnectedness of sovereign and financial system ratings in a high-debt, high-rate environment. As Moody’s put it, “there is a moderate probability of US Government support,” but its relative capacity to backstop large banks has diminished.

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