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After $613M settlement, Moody's reviews US Bancorp for downgrade

Moody's on Feb. 22 placed U.S. Bancorp's long-term ratings on review for downgrade, following settlements with regulators over deficiencies in its Bank Secrecy Act/anti-money laundering compliance program.

Regulators' examples of control failures at the Minneapolis-based company "[called] into question the rating agency's own assumption that [U.S. Bancorp's] risk management is superior to peers," Moody's said. And the $613 million total penalty, while "modest" for a $462.04 billion-asset company with a fourth-quarter 2017 profit of $1.69 billion, was above expectations.

Moody's will assess "the extent to which [the company's] risk governance remains a comparative strength relative to its large bank peers... [and the] likelihood that further missteps could be discovered outside of BSA/AML." The agency noted that other legal issues, even unrelated ones, could be considered a violation of its deferred prosecution agreement.

Among the ratings on review for downgrade are U.S. Bancorp's A1 long-term issuer rating, senior and subordinated debt, and its A3 (hyb) noncumulative preferred stock. Also impacted are U.S. Bank NA's A1 long-term issuer rating and senior debt and its Aa1 long-term deposit rating.

Moody's affirmed U.S. Bancorp's commercial paper and U.S. Bank's short-term deposit and commercial paper ratings at P-1.

Fitch Ratings has already downgraded several of U.S. Bancorp's ratings, saying the details disclosed of the company's actions were "credit negative" for the company's credibility.