Silicon Valley Bank collapse: 6 US banks under Moody’s review lens

Silicon Valley Bank fallout: After the collapse of Silicon Valley Bank, rating agency Moody’s Investors Service has placed six other banks, including First Republic, on review for downgrade. The other lenders on the list are Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp. and Comerica Inc., according to a report in Bloomberg News.

The credit rating agency said it is concerned over these lenders’ reliance on uninsured deposit funding and unrealised losses in their asset portfolios.

“The review for downgrade reflects the extremely volatile funding conditions for some US banks exposed to the risk of uninsured deposit outflows,” Moody’s said in a statement on Tuesday. It added that a “material” amount of deposits is above the Federal Deposit Insurance Corporation (FDIC) threshold.

“Ratings could be downgraded if the bank’s deposit base has eroded markedly, triggering asset sales, loss crystallization and a higher reliance on market funding,” it added.

On Friday, Moody's downgraded the ratings of SVB Financial Group and Silicon Valley Bank, and said that it expects SVB Financial to enter bankruptcy. Following this, the bank regulators in the US shut down the "financial partner of the innovation economy", after SVB suffered a swift collapse.

Moody’s also downgraded Signature Bank and withdrew its credit rating.

Tuesday’s watch assessment comes after US bank stocks showed a massive drop on Monday. These included San Francisco-based First Republic. On Monday, First Republic slipped 62 per cent, while Western Alliance dropped 47 per cent. Dallas-based Comerica slid 28 per cent.
First Republic had tried to reassure investors with a statement about the strength of its liquidity but still saw the stock prices drop.

Investors in the US are jittery over the US government’s hastily assembled weekend rescue plan for the banking system and whether that will be sufficient to stem the fallout from the collapse of SVB.

Asia's market fall

On Tuesday, Asia's share markets slid on Tuesday, with Japan's financial stocks leading losses as fear of a U.S. banking crisis gripped investors ahead of crucial inflation data due later in the day.

Fallout from the collapse of U.S. lenders Silicon Valley Bank and Signature Bank widened overnight, despite government efforts to shore up confidence. Heavy selling hit U.S. regional bank stocks and traders raced headlong from bets on U.S. rate hikes, reckoning the Fed would now be thinking twice.

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