https://sputnikglobe.com/20230314/moodys-downgrades-outlook-on-us-banking-system-to-negative-1108390053.html
Moody's Downgrades Outlook on US Banking System to Negative
Moody's Downgrades Outlook on US Banking System to Negative
Sputnik International
WASHINGTON (Sputnik) - Moody's Investors Service has downgraded its outlook on the US banking system to negative, citing a “rapidly deteriorating operating... 14.03.2023, Sputnik International
2023-03-14T15:35+0000
2023-03-14T15:35+0000
2023-03-14T17:02+0000
economy
us
silicon valley bank collapse
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“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 was quoted as saying by the broadcaster.SVB is the largest US lender to fail since Washington Mutual collapsed in 2008 at the height of that year's financial crisis. Investors at the California-based bank withheld $42 billion in deposits last week, triggering a 60% plunge in its share prices.Moody’s said although the US Treasury, Federal Reserve and FDIC announced all depositors of SVB and Signature Bank will be made whole, "the rapid and substantial decline in bank depositor and investor confidence precipitating this action starkly highlight risks in US banks' asset-liability management (ALM) exacerbated by rapidly rising interest rates."Moody’s also noted that while the Fed’s new temporary liquidity facility for banks could reduce contagion risks from the SVB fallout, "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."Banks with lower unrealized securities losses, stronger capitalization, diverse sectoral exposures and granular insured deposit bases will be more shielded or benefit from a flight to quality, the report said."Our base case is for the Fed's monetary tightening to continue, which could deepen some banks' challenges," the report added.The Fed added 450 basis points to interest rates in eight rate hikes over the past year, in a bid to control runaway inflation triggered by the trillions of dollars of relief spending forced by the coronavirus pandemic measures.Since the outbreak of the SVB crisis, there have been growing calls on the Fed to do limited interest rate hikes or stop monetary tightening altogether until it is certain that the economy is sound and will not be tipped into a recession by the central bank’s actions.The Fed’s next rate decision is on March 22, where it is widely expected to add another 25 basis points, bringing rates to a peak of 5%. They stood at a high of just 0.25% during the height of the COVID-19 crisis in March 2020.
https://sputnikglobe.com/20230314/us-treasury-simply-printing-money-to-bail-out-collapsed-silicon-valley-bank-economists-warn-1108373165.html
https://sputnikglobe.com/20230314/fed-further-increasing-interest-rates-may-worsen-us-banking-crisis-prof-warns-1108378304.html
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us, silicon valley bank collapse
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Moody's Downgrades Outlook on US Banking System to Negative
15:35 GMT 14.03.2023 (Updated: 17:02 GMT 14.03.2023) WASHINGTON (Sputnik) - Moody's Investors Service has downgraded its outlook on the US banking system to negative, citing a “rapidly deteriorating operating environment” after the collapse of one of the 20 largest lenders in the country, a American TV channel reported on Tuesday.
“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 was quoted as saying by the broadcaster.
SVB is the largest US lender to fail since Washington Mutual collapsed in 2008 at the height of that year's financial crisis. Investors at the California-based bank withheld $42 billion in deposits last week, triggering a 60% plunge in its share prices.
SVB provided financing for almost half of US venture-backed technology and health care companies. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, $137.6 billion of which was held by US depositors. Its total assets were $209 billion as of the end of 2022.
The Federal Deposit Insurance Corporation (FDIC) took charge of SVB over the weekend. The FDIC also took control of Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of last year, according to the New York Department of Financial Services.
Moody’s said although the US Treasury,
Federal Reserve and FDIC announced all depositors of SVB and Signature Bank will be made whole, "the rapid and substantial decline in bank depositor and investor confidence precipitating this action starkly highlight risks in US banks' asset-liability management (ALM) exacerbated by rapidly rising interest rates."
Moody’s also noted that while the Fed’s new temporary liquidity facility for banks could reduce contagion risks from the SVB fallout, "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."
Banks with lower unrealized securities losses, stronger capitalization, diverse sectoral exposures and granular insured deposit bases will be more shielded
or benefit from a flight to quality, the report said.
"Our base case is for the Fed's monetary tightening to continue, which could deepen some banks' challenges," the report added.
The Fed added 450 basis points to interest rates in eight rate hikes over the past year, in a bid to control runaway inflation triggered by the trillions of dollars of relief spending forced by the coronavirus pandemic measures.
Since the outbreak of the SVB crisis, there have been growing calls on the Fed to do limited
interest rate hikes or stop monetary tightening altogether until it is certain that the economy is sound and will not be tipped into a recession by the central bank’s actions.
The Fed’s next rate decision is on March 22, where it is widely expected to add another 25 basis points, bringing rates to a peak of 5%. They stood at a high of just 0.25% during the height of the COVID-19 crisis in March 2020.
