Moody's Investors Service downgraded
its outlook for the US banking system from stable to negative, citing massive deposit runs at Silvergate Capital Corp., SVB Financial Group's Silicon Valley Bank, and Signature Bank that led to the collapse of all three
lenders
in less than a week.
While federal regulators “announced that all SVB and Signature Bank clients
will be repaid, the sharp and rapid decline in banking customer and investor confidence that this move precipitated clearly highlights
the risks in US banks' asset and liability management
.
exacerbated by rapidly rising interest rates, Moody's said late Monday in a research report.
The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation took extraordinary steps Sunday to bolster confidence in the financial system following the collapse of Silicon Valley Bank, introducing new support for banks that officials say the Fed, is big enough to protect the deposits of the entire nation.
The announcement came alongside the surprise closure of
Signature Bank of New York
by state banking regulators amid growing concerns about the repercussions for other regional lenders and the broader economy.
Signature Bank headquarters in New York.
Photo: Reuters
“The Fed announced
a new temporary liquidity facility
to offer banks loans against collateralized eligible government securities to help meet their funding needs and reduce contagion risks,” Moody's said.
“However,
banks with large
unrealized value losses and uninsured, non-retail US customers could still be more susceptible to customer competition or further flight, with
adverse effects
on funding, liquidity, profits and capital," he added.
The cut in the outlook for the nation's banking system came as Moody's placed
six US lenders
on review for a downgrade.
These are: First Republic Bank, Western Alliance Bancorp, Intrust Financial Corp., UMB Financial Corp., Zions Bancorp, and Comerica Inc.
The credit rating company cited concerns such as unrealized losses in lenders' asset portfolios and risks to profitability.
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