(Finance) – “We have changed our outlook on the US banking system from stable to negative to reflect the rapid deterioration in the operating environment following the runs of deposits at Silicon Valley Bank (Svb), Silvergate Bank and Signature Bank (Sny) and the bankruptcies by Svb and Sny”. That’s what it says Moody’s in a note announcing the downward revision of the outlook on the US banking system from “stable” to “negative”. While the stock exchanges on both sides of the Atlantic are making strong progress with gains of more than 2% thanks to the banks that regain momentum and US inflation in line with expectations, the rating agency has also placed under observation for a possible downgrade First Republic and five other institutes (Zions Bancorp, Western Alliance Bancorp, Comerica Inc, Umb Financial Corp and Intrust Financial Corp). The operation follows the closing of the Signature Bank by the New York State Department of Financial Services (NYDFS) after a significant outflow of deposits following the bankruptcy of Silicon Valley Bank (SVB).
“Although the Treasury Department, the Federal Reserve and the FDIC have announced that all those who had deposits in SVB and Signature Bank will be cleaned up,” therating agency The rapid and substantial decline in bank depositor and investor confidence clearly highlights risks to US bank liability management exacerbated by rapidly rising interest rates. The Fed announced a new temporary liquidity facility to offer banks collateralized loans to meet their funding needs and reduce contagion risks. However, banks with substantial unrealized securities losses and with uninsured, unretail US depositors may be even more sensitive to competition or outright flight, with adverse effects on funding, liquidity, earnings and capital. The Fed’s monetary tightening will continue, which could exacerbate the difficulties of some banks.
The withdrawal of deposit ratings and other valuations of Signature Bank – said Moody’s – is based on the transfer of its bonds to the bridge bank.