Fitch rattled equity markets recently when it published a warning on the exposure of top U.S. banks to the European debt crisis.

According to the credit rating company, the six biggest U.S. banks--JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley--held a combined $50 billion in risk tied to the GIIPS countries (Greece, Ireland, Italy, Portugal and Spain) as of Sept. 30. This would appear to be a manageable level of risk. But there's a lot of secondary risk, as U.S. banks remain much more heavily exposed to larger European economies such as Britain and France, and to big European entities that are themselves more heavily exposed.

So as the debt crisis continues to spread, the liability domestically threatens to move much higher. Reuters reports that Standard & Poor's, under pressure to demonstrate competence in its rating business, will soon weigh in on U.S. banks. Within three weeks, it will upgrade its debt ratings for the 30 biggest banks, and it is quite possible that ratings will decline for some of the biggest banks. Already, S&P has downgraded European banks.

S&P has been preparing the market for its update, providing advance notice as early as January. Still, any big downgrades will be noted by the market. The company has said that 15 percent of banks will be reduced one notch and less than 5 percent will be reduced by two or more notches.

A side note: S&P sent a false note that some interpreted as indicating a downgrade for France. The company said it was a computer glitch.     

For more:
- here's the article

Related articles:
SEC may charge S&P over faulty CDO ratings   
Backlash against S&P continues