The darkest credit rating agency in the entire US banking sector
The outlook for the entire US banking sector has deteriorated, according to ratings agency Moody’s. Two banks, Silicon Valley Bank and Signature Bank, collapsed over the weekend as customers withdrew their funds out of fear. According to Moody’s, other banks could also be affected by customers who prefer to store their balances elsewhere.
The outlook for the US banking system is now “negative”, according to Moody’s, whereas it was previously “stable”. This means that a credit rating downgrade is likely for the foreseeable future.
The U.S. apex central bank, the Federal Reserve, provided emergency loans against certain bonds as collateral after the turmoil surrounding U.S. banks. But according to Moody’s, the risks have not yet passed. These are especially important for banks that have invested a lot of money in bonds that have fallen in value due to rising interest rates. Even though there are many business customers or account holders who have a large portion of their assets uninsured, this can put pressure on banks as they withdraw their money as a precaution.
Silicon Valley Bank went bankrupt on Friday after a bank run in which account holders withdrew some $45 billion in assets. Control of Signature Bank in New York was taken over by the government on Sunday because customers here also came in large numbers to claim credit. The New York state financial regulator also said it had lost confidence in Signature Bank administrators because they would not have been able to share reliable data.
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