Credit-rating agencies are generally praising the decisions of the last two major investment banks, Goldman Sachs and Morgan Stanley, to convert into bank holding companies.

“Both firms will benefit from direct access to the Fed discount window and while the primary dealer credit facility is similar, they benefit from the permanency and broader collateral eligibility at the Fed discount window, including the ability to pledge whole loans,” Fitch Ratings said, noting that they will also benefit from national bank charters in various ways.

Fitch will evaluate other benefits of financial holding company status in addition to any changes in the overall risk appetites of these institutions and subsequent profitability, it said.

However, it cautions that, “the transition to, and ongoing development of, the universal bank model has not been an automatic success for other firms in the industry. Current global economic conditions add to the challenges.”

Capital has been adequate, Fitch notes. However, it points out that equity and credit-default swap prices have had substantial influence on financial flexibility across several financial institutions, increasing the risk of liquidity calls in some cases. So, Goldman Sachs and Morgan Stanley may experience some liquidity and capital pressures despite the strength of core performance as they respond to counterparties’ discomfort with the broker dealer business model, it says.

Toronto-based rating agency DBRS said that it views the conversions positively for similar reasons: permanent access to the U.S. Federal Reserve Board, diversification of funding capabilities and improved ability to efficiently utilize resources, particularly banking subsidiaries.

DBRS added that it also views the announcement positively because it advances the already heightened level of supervision. It anticipates that investors will benefit from increased disclosure under current bank holding company reporting leading to improved market confidence. “While this may enhance market perceptions, the increased regulatory constraint may adversely impact some businesses,” it allows. Also, reduced leverage is also likely, which could constrain profitability, it says.

In Morgan Stanley’s case, DBRS says it is also positive on the company’s announcement that it is pursuing a strategic alliance with Mitsubishi UFJ Financial Group, Inc., which is expected to eventually take a 20% stake in Morgan Stanley. DBRS notes that this step should provide Morgan Stanley with a sizeable capital injection to further solidify its balance sheet. Besides offering future business opportunities, the partnership should also help improve market confidence, it adds.