Moody’s downgraded the credit ratings of a number of small and mid-sized US banks, as well as numerous prominent Wall Street companies.
Moody’s reduced the ratings of 10 banks by one rung, and major lenders Bank of New York Mellon, U.S. Bancorp, State Street, Truist Financial, Cullen/Frost Bankers, and Northern Trust are currently being reviewed for a possible downgrade.
In addition, Moody’s downgraded 11 banks, including Capital One, Citizens Financial, and Fifth Third Bancorp.
M&T Bank, Pinnacle Financial, BOK Financial, and Webster Financial were among the smaller lenders to have their ratings downgraded.
“As the wind-down of unconventional monetary policy drains systemwide deposits and higher interest rates depress the value of fixed-rate assets, US banks continue to contend with interest rate and asset-liability management (ALM) risks with implications for liquidity and capital,” Moody’s analysts Jill Cetina and Ana Arsov wrote in an accompanying research note.
After the failures of Silicon Valley Bank and Signature Bank caused a run on deposits throughout the industry earlier this year, regional US banks were thrown into the limelight. The fear soon extended throughout Europe, prompting domestic competitor UBS to come to the rescue of Swiss behemoth Credit Suisse.
Despite the efforts of authorities to rebuild trust, Moody’s warned that banks with significant unrealized losses that are not recorded by statutory capital ratios may still be vulnerable to unexpected losses.
The Federal Reserve raised its benchmark borrowing rate to 5.25%–5.5% in July after substantially tightening monetary policy over the previous year and a half in an effort to rein in sky-high inflation.
