Hong Kong ( CNN ) -- The health of several of the world 's biggest banks has been called into question following the decision by Moody 's to downgrade their credit ratings . In all , 15 institutions were downgraded after Wall Street closed Thursday , including Bank of America , Goldman Sachs , JPMorgan , Morgan Stanley , Citigroup , Royal Bank of Scotland , Barclays , HSBC , Credit Suisse , UBS , BNP Paribas , Credit Agricole , Societe Generale , Deutsche Bank and Royal Bank of Canada . `` All of the banks affected by today 's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities , '' Moody 's Global Banking Managing Director Greg Bauer said in a statement . How the major banks are affected . The banks were unimpressed with the move , with many questioning how the ratings agencies make their decisions . Citi called its two-notch downgrade `` arbitrary and completely unwarranted , '' according to CNNMoney . So how did the global economy become so dependent on the opinions of three companies ? Who are the credit rating agencies ? The `` big three '' are Standard & Poor 's , Moody 's Investor Services and Fitch Ratings . All originated in the United States , although Fitch has dual headquarters in New York and London . What do they do ? Before you can get a credit card , banks run a credit check on you . Similarly , the ratings agencies run credit checks on companies , countries and financial products -- and banks themselves . The agencies assess their the ability to pay off loans or investments and then rate them on a sliding scale , ranging from AAA to D. In the case of government bonds , anything that slips to BB+ , as was the case with crisis-hit Greece , is considered a `` highly speculative '' investment : or `` junk bonds '' in the parlance of the markets . Stocks plunge on downgrade fears . In the context of Thursday 's announcement , Moody 's grouped the 15 banks into three categories based on their credit worthiness . JPMorgan , HSBC and the Royal Bank of Canada made up the top group , which Moody 's said had solid capital buffers and `` contained '' exposure to the European crisis . The second group included Goldman Sachs , Societe Generale , Barclays , Credit Agricole , BNP Paribas , Credit Suisse , Deutsche Bank and UBS . Moody 's said these firms had varying risk factors , from high dependence on capital markets operations to limited liquidity and exposure to Europe . Bank of America , Citigroup , Morgan Stanley , and Royal Bank of Scotland ( RBS ) made up the bottom -- and weakest -- group of banks . Moody 's said these companies experienced problems with volatility and risk management , while their financial `` shock absorbers '' are in some cases thinner or less reliable than their peers . Credit Suisse took the biggest hit from the Moody 's announcement , suffering a three-notch downgrade , just days after Switzerland 's central bank warned it to bolster its capital . What does a debt rating downgrade mean ? Banks could see their costs rise as it becomes more expensive for them to borrow money . Officially they are now a riskier proposition for lenders because of their exposure to events such as the European debt crisis . These additional costs -- potentially billions of dollars -- could eventually be passed to the banks ' customers through higher interest rates on loans and mortgages . Why do the agencies wield such power ? Investors across the world look to credit ratings agencies to judge where to place their bets in the market . For governments , the ratings agencies have a lot of power over the popularity of bonds : cash given to governments like Greece by investors that , over time , will pay a return on the original investment -- unless the government defaults . The downgrade of Greece signaled Standard & Poor 's belief that Greece has a higher likelihood to default on investments . It caused investors to lose their appetite to invest in bonds from Greece , which imperils the nation 's ability to pay down its deficit . How are ratings agencies paid ? Historically , they were created to give investors an unbiased assessment of investments and investors paid for access to the ratings . In the 1970s , however , credit rating agencies started charging the issuers of new investments fees for ratings . In 1975 , U.S. legislators -- fearing a proliferation of unscrupulous ratings agencies -- designated Standard & Poor 's , Moody 's and Fitch as the only ratings organizations banks and brokers could use to evaluate the credit worthiness of their products . What are the complaints against the firms ? Critics complain the agencies have lost their ability to independently judge the risk on certain investments -- especially in light of AAA ratings given to mortgage-backed securities that imploded when defaults on U.S. home loans shot up , triggering the 2008 financial crisis . Critics also note that the agencies are paid by the very entities they rate , raising questions about their trustworthiness . Lawmakers in the United States , the European Union and other countries around the world are now reviewing regulations on the credit ratings agencies . Credit ratings agencies , too , have revamped their procedures and have argued their ratings are merely opinions -- it 's up to the markets to decide .
`` Big Three '' are Standard & Poor 's , Moody 's Investor Services and Fitch Ratings . Critics say the agencies have lost their ability to independently judge risk on certain investments . Comment: 15 of the world 's biggest banks downgraded due to exposure to global financial crisis .