Updated with comments from UBS economist Paul Donovan.



) -- Moody's Investor Service on Tuesday announced it had put 87 European banks on review for ratings downgrades on subordinated, junior and Tier 3 debt.

The review encompasses banks in 15 countries, with "potential downgrades of subordinated debt by two notches and junior subordinated debt and Tier 3 debt by one notch," according to the ratings agency.

Moody's said "the greatest number of ratings to be reviewed are in Spain, Italy, Austria and France," and "followed on from removal of systemic support from subordinated debt in systems including Denmark, U.K., Ireland, Germany," and that "within Europe, systemic support for subordinated debt may no longer be sufficiently predictable or reliable to be a sound basis for incorporating uplift into Moody's ratings."

The ratings agency also said that the various possible solutions to the eurozone debt crisis "have the common objective of reducing very significantly the support provided to creditors and leave subordinated debt holders particularly exposed to exclusion from any support received."

Underscoring the great likelihood of a slew of downgrades, Moody's added that since European "policy makers are increasingly unwilling and/or constrained in their support for all classes of creditors, in particular for subordinated debt holders," and since "there have been recent instances where losses have been imposed on subordinated debt holders without any significant contagion to other liability classes (e.g., in Ireland)," there would need to be "very clear reasons for Moody's to consider retaining an assumption of support in subordinated debt ratings."

According to a


report, large banks being reviewed by Moody's for downgrades include


(UBS) - Get Report


Banco Santander



Credit Suisse

(CS) - Get Report




Societe Generale


BNP Paribas


UBS Investment Research economist Paul Donovan said in a report Tuesday that the Eurozone crisis "has challenged preconceived ideas about safe investing," and that "the traditional risk free proxy of government bonds is clearly no longer applicable."

Donovan added that "cash is of questionable safety if there are questions about the solvency of the banking system," and that "existential questions" about the common currency "means the safety of any Euro denominated asset could be seen as being at risk."


Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.