The credit rating agency announced it was placing 17 banks on review for a downgrade earlier this year, citing “vulnerabilities” in the companies’ vast and volatile capital markets businesses.

The potential downgrades have become a talking point on Wall Street, with some bankers openly criticizing Moody’s and others privately attempting to change the agency’s mind in closed-door meetings.

But in an interview with the Financial Times, Moody’s banking analysts said the agency was updating its financial ratings to take into account the historical tendency of banks to leverage their balance sheets and arbitrage global financial rules, often to the detriment of the banks’ own health and the safety of the wider banking system.

“These firms are constantly moving into and out of new products,” said Mark LaMonte, chief credit officer of financial institutions at Moody’s. “The regulatory rules around risk weighting may not be able to keep up with them.”

Moody’s caution could see all 17 banks downgraded when the review is finally completed, expected to happen in mid-June. Three of the banks, Credit Suisse , Morgan Stanley , and UBS , face as much as a three-notch downgrade; 10 face a two-notch slide and four a one-notch drop.

“We very strongly disagree with some of the things that Moody’s has mentioned in some of their reports,” David Viniar, chief financial officer at Goldman Sachs, said in a conference call with analysts last month. “We think that if you look at every single credit metric there is for Goldman Sachs, and frankly for many of our competitors, none of the actions they’ve talked about are warranted.”

Some banks say that new rules clamping down on leverage and encouraging them to hold more higher-quality capital will make their businesses safer, potentially at the expense of their return on equity, a key measure of profits.

“I’m sure they’re looking for every lever they can identify to improve their [return on equity],” Peter Nerby, Moody’s banking analyst, said in an interview.

He added: “They have derisked a great deal but when the sun comes out it will be reasonable to expect them, to the degree they can, to increase leverage again.”