Moody's worsens forecasts for US banks

A few days after the collapse of Silicon Valley Bank, the Moody's rating agency revised its outlook on the US banking system to negative

by Lorenzo Ciotti
Moody's worsens forecasts for US banks

A few days after the collapse of Silicon Valley Bank, the Moody's rating agency revised its outlook on the US banking system to negative. A statement from the agency said: "We have changed our outlook on the US banking system from stable to negative to reflect the rapidly deteriorating operating environment following the runs of deposits at Silicon Valley Bank, Silvergate Bank and Signature Bank and the failures of Svb and SNY Although the Treasury Department, Federal Reserve and FDIC have announced that all those who had deposits in SVB and Signature Bank will be healed the rapid and substantial decline in depositor and bank investor confidence clearly highlights the risks to liability management of US banks exacerbated by rapidly rising interest rates.

The Fed announced a new temporary liquidity facility to offer banks loans backed by eligible government bonds to meet their funding needs and reduce contagion risks. However, banks with substantial unrealized securities losses and d Non-retail, uninsured US depositors may be even more sensitive to competition or outright flight, with adverse effects on funding, liquidity, earnings and capital.

The Fed's (central bank) monetary tightening will continue, which could exacerbate the difficulties of some banks." The news came on the day when stock markets rose again after Monday's losses, worse in Europe than in the United States, where the rapid interventions of the Biden administration and independent authorities had made it possible to secure the markets.

The vice president of the European Commission Valdis Dombrovskis, explained: "We are monitoring the situation" after the crisis triggered by the failure of the Silicon Valley Bank. We note the swift and decisive reaction of the US authorities.

At EU level there is a very limited presence of Silicon Valley Bank and we are in contact with the relevant authorities but we do not expect any repercussions." according to the Wall Street Journal, the Justice Department and the SEC, the American supervisory authority similar to our Consob, have launched investigations into the failure of Silicon Valley Bank, US politics is engaged in launching cross accusations about the responsibilities for the collapse.

Republicans accuse Democrats, in particular Trump points the finger at the policies adopted by SVB on diversity and the environment. Conversely, the Democrats who sit in Congress are angry with the deregulation implemented during the tycoon's presidential term, but also against the central bank, which would not have fully fulfilled its duty of supervision.

Meanwhile, the race to transfer deposits from regional banks to large institutions such as JPMorgan and Citigroup has started. records the Financial Times. Consumer requests to transfer funds are flooding the big banks, who are trying to accommodate the requests by speeding up the process of opening checking accounts.

The Dow Jones index rose by 0.89% to 32,103.57 points, the S&P 500 gained 1.26% to 3,904.36, the Nasdaq by 1.58% to 11,365.30 points. Regional bank stocks enjoyed double-digit rebounds: First Republic Bank rose 55% after losing 62% on Monday, PacWestBancorp 40%, Western Alliance Bancorp 21%.

Silicon Valley