Moody’s Cuts Outlook on US Banking System, Downgrades or Reviews Ratings of Seven Regional Banks

The banking sector has been dealt a harsh blow with Moody’s Investors Service on Monday cutting its outlook on the entire US banking system to negative from stable. This follows the collapse of Silicon Valley Bank (SVB) and the failure of Silvergate Bank and Signature Bank (SNY).

Moody’s said the move was in light of key bank failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis. The credit ratings agency flagged several financial institutions that share some risk factors with the failed bank, such as high amounts of unrealized losses held by some banks and large shares of deposits that aren’t covered by the Federal Deposit Insurance Corporation.

As a result, Moody’s on Tuesday said it either downgraded or is reviewing the ratings of seven regional banks, including First Republic Bank and Zions Bancorp. The firm said it was making the move in light of key bank failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis.

The banking sector is facing a difficult period as the fallout from the collapse of Silicon Valley Bank continues to reverberate. Moody’s has downgraded or is reviewing the ratings of seven regional banks, and is warning of the potential risks posed by high amounts of unrealized losses held by some banks and large shares of deposits that aren’t covered by the Federal Deposit Insurance Corporation.

The US banking system is facing an uncertain future as regulators step in to provide a rescue plan for depositors and other institutions impacted by the crisis. It remains to be seen how the banking sector will weather this storm, and what measures will be taken to ensure the stability of the system going forward.