Moody’s changes outlook on U.S. banking system to ‘negative’ after SVB collapse

A U.S. flag is seen outside the New York Stock Exchange (NYSE) in New York City, U.S., Jan 26, 2023. REUTERS/Andrew Kelly/File photo

Moody’s Investors Service on Tuesday revised its outlook on the U.S. banking system to “negative” from “stable”, citing heightened risks for the sector after the rapid unraveling of SVB Financial Group fueled fears of contagion.

Bank runs at Silicon Valley Bank, Silvergate Capital Corp and Signature Bank have deteriorated the operating environment for the sector that is now battling a crisis of confidence, both from investors and depositors, the ratings agency said.

Lenders that had “substantial” unrealized securities losses and uninsured deposits may be hurt more as customers look for safer alternatives to park their funds.

Moody’s also said it was expecting the Federal Reserve to continue tightening monetary policy, in contrast to some others who are expecting the bank collapses this month to reshape the trajectory for interest rate hikes.

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