Trying to fill what it caled a "research gap" concerning credit risks of derivatives claims, Moody's Investors Service Inc. assigned counterparty ratings Thursday to 276 banks and thrifts.

The ratings ranged from Aaa, for some J.P. Morgan & Co. units, to Caa, for California Federal Bank. The 276 institutions account for virtually all of the derivatives activity of U.S. banks and thrifts.

By assigning separate ratings for institutions as counterparties, Moody's underscored concerns that have arisen in the past few weeks in the wake of large first-quarter losses and soured swaps contracts bought by Procter & Gamble Co. and other corporations.

The move also amounts to a recognition of banks' increased dealing in interest rate swaps and other derivatives contracts. Previously Moody's has assignBd counterparty ratings to only to seven companies that specializes in derivatives.

The counterparty ratings are part ofa broader initiative by the agency to assess derivative risk.

Moody's said it was most concerned about profit-oriented derivative managers, who are operating without the tools they need to manage the risk.

Banks say they are selling the contracts as a way to hedge market risks, especially the risk of interest rate changes. A number of contracts have soured as interest rates rose, reducing the value of contracts bought on the assumption that rates would fall or remain stable.

A More Precise Gauge

The ratings will provide buyers a more precise gauge of the risk that the bank selling the instrument won't be able to meet its obligations.

"What we've found is that many investors have been using debt ratigs as proxy for counterparty risk. That may not be a good transference," a Moody's spokesman said.

Moody's said 25 institutions, generally those with the lowest investment grade rating or worse, received counterparty ratings lower than their deposit ratings. The difference was usually a single notch on the rating scale.

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