People walk past the New York Stock Exchange (NYSE) on Wall Street on July 12, 2022 in New York City.
Angela Weiss | AFP | Getty Images
In a harsh blow to an already-reeling sector, Moody’s Investors Service on Monday cut its view on the entire banking system to negative from stable.
The firm, part of the big three rating services, said it was making the move in light of three key failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis.
related investing news
“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 said in a report.
The move followed action late Monday when Moody’s warned that it either was downgraded or placing on review for downgrade seven individual institutions.
In its downgrade of the entire sector, the ratings agencies noted the extraordinary actions taken to shore up the sector. But it said other banks with unrealized losses or uninsured depositors still could be at risk.
The Federal Reserve established a facility to ensure that institutions hit with liquidity problems would have access to cash. Treasury backstopped the program with $25 billion in funds and vowed that depositors with more than $250,000 at SVB and Signature would have full access to their funds.
But Moody’s said that concerns remain.
“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.
Bank stocks rallied strongly despite the downgrade. The SPDR Bank exchange-traded fund rose nearly 6.5% in morning trade. Major indexes also were higher, with the Dow Jones Industrial Average up nearly 450 points, or 1.4%.
Moody’s on Monday downgraded Signature Bank and said it would remove all ratings. It placed the following institutions under review for potential downgrades: First Republic, INTRUST Financial, UMB, Zions Bancorp, Western Alliance and Comerica.
This is breaking news. Please check back for updates.