Andrew Cuomo's office issued subpoenas late yesterday, notifying the banks of his investigation, the newspaper said. The banks being probed are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, now owned by Bank of America.

The inquiry by Cuomo suggests he thinks the rating agencies may have been duped by one or more of the targets of his investigation, the report said.

The investigation adds to the recent saga of how the Securities & Exchange Commission last month accused Goldman Sachs of dishonestly playing both sides of the market via the sale of collateralised debt obligation securities. This event has added to concerns about the conflicts of interest that arise within big, integrated banking groups and also with institutions such as credit rating agencies.

The NYT said spokespeople for Morgan Stanley, Credit Suisse and Deutsche Bank declined to comment. Other banks did not immediately respond to requests for comment.

Standard & Poor’s, Fitch Ratings and Moody’s Investors Service – the “big three” of the rating agency world, rated the mortgage deals in question, the report said.

Meanwhile, a report in today’s Financial Times said that Morgan Stanley’s chief executive was quoted saying that the firm had “no knowledge whatsoever” of a US government probe into it, as its shares fell following a report that federal prosecutors were looking at mortgage-related deals.

James Gorman said the US Department of Justice had not asked the bank about two collateralised debt obligations – securities backed by mortgages – as mentioned by the Wall Street Journal.