Standard & Poor's has downgraded 11 major US and European banks as they strive to do business in a market where credit is tight.

Some of the banks downgraded are the US municipal bond market's largest letter of credit (L/C) providers.

Downgrades

The municipal market two largest L/C providers - Bank of America NA and JPMorgan Chase Bank NA - are both downgraded to AA-minus from AA.

Both banks have maintained Standard & Poor's short-term ratings of A-1-plus, the agency's highest rating.

Largest providers

Bank of America has this year provided L/Cs for 233 municipal bond market issues at a total value of US$16 billion, according to Thomson Reuters.

It is way ahead of second ranking JPMorgan Chase, which has provided L/Cs for 137 municipal bond market issues at a total value of US$6.8 billion.

Other banks downgraded by Standard and Poor's include Barclays, Citibank NA, Credit Suisse, Deutsche Bank, Goldman Sachs Group, Morgan Stanley, Royal Bank of Scotland, UBS and Wells Fargo.

Sustained availability

The use of L/Cs to provide liquidity support for the US municipal bond market has increased substantially this year.

Analysts say the downgrades should not impact on L/C availability in the short-term.

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