The closure of Silicon Valley Bank: Moody’s downgrades US banks to negative after bank failure

Moody’s Investor Service rwent from stable to negative his outlook for the US banking system, citing massive withdrawals of deposits 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 customers of SVB and Signature Bank will be compensated, the rapid and sharp drop in confidence of bank customers and investors that this measure has accelerated clearly shows the risks in managing the assets and liabilities of US banks. exacerbated by the rapid rise in interest rates, Moody’s said in a research report on Monday.

The Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation took extraordinary steps Sunday to boost confidence in the financial system after the Silicon Valley Bank collapse, introducing new support for banks that Fed officials say is large enough to protect the deposits of the entire nation.

The announcement came in conjunction with the surprise closure of Signature Bank of New York by state-owned bank regulators amid growing concerns about the repercussions for other regional lenders and the broader economy.

“The Fed has announced a new temporary liquidity facility to offer banks loans against eligible government bond collateral to help meet their funding needs and reduce contagion risks,” Moody’s said.

“However, banks with big losses of unrealized securities and uninsured, non-retail U.S. clients may be even more susceptible to client competition or further flight, cwith adverse effects in funding, liquidity, earnings and capital,” he added.

The downgrade in the outlook for the domestic banking system came with Moody’s position six US lenders under review for a discount.

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.