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Oil Slump May Hit U.S. Investment Banks' Capital Market Revenue

Revenue generated by U.S. investment banks through their capital markets businesses may “suffer” if oil and commodity prices stay low and the global economy slows further, Moody’s Investors Service has warned.

While direct energy loan exposures for the largest U.S. banks look “manageable relative to earnings” and most of their exposures are to investment-grade borrowers, additional loss provisions will be necessary in some cases should oil remain subdued for an extended period, the credit assessor said in a report dated Feb. 24. Moody’s also warned that “lower-for-longer” oil prices presented a rising threat for lenders around the world.