Moody's will soon name which bank hybrids will be affected by its decision to change the methodology by which it rates these securities. The ratings agency really had no choice, and this change has been in the works for a while now. It's not like it was a secret.

The issue is that holders of these securities weren't really treated all that well through the credit crunch. In Europe, some banks were banned from paying out coupons or buying them back. Instead, they were treated more like common holders: that is, they were forced to swallow some bitter medicine. The new methodology will assume that's how they will be treated in rough times. So many will be downgraded, as this assumption of safety for subordinated holders is weakened accordingly.

Many banks are facing multi-notch downgrades, notes the Financial Times. It's unclear how this will effect CoCos, which are in the early stages of a revival of sorts. These, too, are hybrids that allow the holders to convert to equity when times get tough. But the issuers may have thought this through, as Moody's plans have been known generally since June. 

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