Moody’s Investors Service has lowered the outlook for the U.S. banking sector from “stable” to “negative” due to the recent failures of several major banks in the country.
Specifically, Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank all experienced deposit runs and/or collapsed, leading to a rapid deterioration in the operating environment for U.S. banks. Moody’s cited risks in U.S. banks’ asset-liability management (ALM) exacerbated by rapidly rising interest rates and the Federal Reserve’s monetary tightening process.
The credit rating agency also warned that U.S. banks now face rising deposit costs, which will result in reduced earnings. While the U.S. government has made depositors whole, Moody’s noted that banks with substantial unrealized securities losses and with non-retail and uninsured U.S. depositors may still be more sensitive to depositor competition or ultimate flight, with adverse effects on funding, liquidity, earnings, and capital.