Moody's Downgrades US Banking System Outlook to 'Negative' Amid SVB Fallout

International credit rating agency Moody's on the 14th (local time) downgraded the outlook for the entire U.S. banking system from 'stable' to 'negative' in response to the fallout from the bankruptcy of Silicon Valley Bank (SVB).

According to the economic media CNBC, Moody's stated in a report, "This adjustment reflects the deposit withdrawal incidents at SVB, Silvergate Bank, and Signature Bank, as well as the rapid deterioration of the business environment following the bankruptcies of SVB and Signature Bank."

This move followed Moody's warning the previous day that it would downgrade or review the credit ratings of seven banks. Earlier, Moody's had announced that it was considering downgrading the credit ratings of regional banks including First Republic Bank, which was engulfed in crisis rumors, as well as Western Alliance Bancorp, Comerica, and UMB Financial.

Moody's expressed concern that despite federal government measures to contain the fallout from SVB's bankruptcy, other banks with unrealized losses and uninsured depositors who are not protected could still be at risk. It also pointed out that the situation of these banks could worsen further as the Federal Reserve (Fed) prolongs tightening to reduce inflation.

Earlier, MarketWatch reported a list of 20 U.S. banks with risks similar to SVB. They all share the commonality of being heavily exposed to unrealized securities losses or having a high ratio of Accumulated Other Comprehensive Income (AOCI) to total equity capital.