News

Published: Mar 15, 2023
Updated: Mar 15, 2023

Moody's Revises Outlook for US Banking System to Negative

Moody's Investors Service has revised its outlook for the US banking system to negative from stable. This comes in response to the recent collapse of SVB Financial Group, which has heightened risks for the sector and sparked fears of contagion. Bank runs at Silicon Valley Bank, Silvergate Capital Corp, and Signature Bank have led to a crisis of confidence among investors and depositors alike, which is further deteriorating the operating environment for the sector.

Unrealized Securities Losses and Uninsured Deposits May Hurt Lenders More

Moody's warns that lenders with substantial unrealized securities losses and uninsured deposits may be hit harder as customers seek safer alternatives to park their funds. This could lead to a decline in assets under management and cause more significant losses for banks. Additionally, the ratings agency expects the Federal Reserve to continue tightening monetary policy, which could compound the challenges faced by banks in this environment.

Uncertainty Looms Over Interest Rate Hikes

While some analysts anticipate that the bank collapses this month will shape the trajectory for interest rate hikes, Moody's believes the Federal Reserve will continue with its plans to tighten monetary policy. This uncertainty only adds to the challenges faced by US banks, which are struggling to regain the confidence of their customers and investors.

Fear among stakeholders

Moody's downgrade of the US banking system outlook reflects the challenges faced by banks in the aftermath of the SVB collapse. The crisis of confidence among customers and investors is likely to lead to more significant losses for banks, particularly those with substantial unrealized securities losses and uninsured deposits. The uncertainty surrounding interest rate hikes only adds to the challenges faced by the sector, which is battling to regain the trust of its stakeholders