Analytics firm Moody’s Investors Service Tuesday, downgraded its rating of the American banking system as a whole, in a blow to the entire U.S. financial network. Photo courtesy of Moody’s Investors Service
March 14 (UPI) — Analytics firm Moody’s Investors Service downgraded its rating of the American banking system as a whole on Tuesday.
The Dallas-based finance company dropped the system’s rating from stable to negative, citing the very public decline of the current banking environment as the reason why.
“We have changed to negative from stable our outlook on the U.S. 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.
The news comes just days after the failure of the three banks, which continues to send shock waves through the financial system.
Tuesday’s Moody’s announcement raises flags, although the report does say the system currently has enough liquidity to sustain itself. However, it hypothesizes regulators may enact more stringent controls as a result of the trio of bank failures, requiring financial institutions to retain more capital.
The Federal Reserve Board confirmed Tuesday it is launching a review of its oversight.
President Joe Biden attempted to calm any public panic Monday, promising to protect deposits of two closed banks and assure Americans the banking system remains strong.
The U.S. Treasury Department is investing $25 billion to ensure any Silicon Valley Bank and Signature Bank customers with over $25,000 in deposits will be able to fully-access their money.
“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,” the report said.
The Federal Reserve Board said Monday, it expects in May to publish a review of the bank failures.