Moody's Investors Service

said it might change its outlook or lower its ratings on individual investment banks if any of the probes of Wall Street firms lead to criminal indictments.

Specifically, Moody's said a criminal indictment of

Merrill Lynch


would prompt a one-notch downgrade of the company's long-term debt ratings.

Merrill has been at the center of a widening probe of the biggest and best-known investment banks. The New York state attorney general, the

Securities and Exchange Commission

and other government agencies have been looking into possible conflicts of interest between investment banks' research departments and their underwriting divisions.

The financial strength of the firm, the exact nature of any charges, the importance of the operations affected, and the extent that a particular firm is singled out will be important in determining any rating action, Moody's said.

The ratings agency expects that the investigations could be lengthy. If the course of the inquiries turns "very negative" for a particular firm, then downgrades of several notches are possible. Moody's said its analysis will focus on the damage of any criminal indictments to the firm's reputation, its long-term franchise with investors and its financial performance.

Moody's rates these investment banks with the following senior unsecured ratings:

Bear Stearns


, A2;

Credit Suisse First Boston

, Aa3;

Goldman Sachs

(GS) - Get Report

, A1;

Lehman Brothers


, A2; Merrill Lynch, Aa3, with a negative outlook;

Morgan Stanley


, Aa3; and

Salomon Smith Barney

, Aa1. Moody's said that all of the firms maintain sound liquidity profiles.