Moody’s warns of more pain for US banks

Ratings giant Moody’s has warned of more pain ahead for the US banking system after a run on deposits led to the collapse of Silicon Valley Bank.


Moody’s cut its outlook for the sector to “negative” from stable, warning of “a rapid deterioration in the operating environment”.


The downgrade came as banking shares in the US and Europe rebounded following earlier losses.


But Moody’s said some other banks faced risks of customer withdrawals.


It said rising interest rates also pose a challenge, exposing banks that bought assets such as government bonds when interest rates were low, to potential losses.


“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,” Moody’s said in the report.


“We expect pressures to persist and be exacerbated by ongoing monetary policy tightening, with interest rates likely to remain higher for longer until inflation returns to within the Fed’s target range.”


Authorities have acted quickly to try to contain fallout after the shock collapse of Silicon Valley Bank (SVB), the 16th largest in the US.

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