by John Carney, Breitbart:
Moody’s Investors Service cut its outlook for the U.S. banking system to negative from stable and placed six U.S. banks on review for potential credit rating downgrades.
“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report released Monday.
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The ratings agency warned that there was still a risk of bank runs at U.S. banks with substantial unrealized losses.
“Banks with substantial unrealized securities losses and with non-retail and uninsured US depositors may still be more sensitive to depositor competition or ultimate flight, with adverse effects on funding, liquidity, earnings and capital,” Moody’s said.
Even banks that do not experience runs are likely to face rising funding costs, cutting into profitability, Moody’s said.
“We expect pressures to persist and be exacerbated by ongoing monetary policy tightening, with interest rates likely to remain higher for longer until inflation returns to within the Fed’s target range,” the report said. “US banks also now are facing sharply rising deposit costs after years of low funding costs, which will reduce earnings at banks, particularly those with a greater proportion of fixed-rate assets.”