US Banking System Cut To Negative After Lender Failures

US banking system outlook has been downgraded to ‘negative’ following recent bank failures

Moody’s has recently changed its outlook on the entire US banking system from “stable” to “negative.”

iexclusivenews understands that the move follows the failures of Silicon Valley Bank, Silvergate Bank, and Signature Bank.

Which prompted regulators to intervene with a rescue plan for affected depositors and institutions.

Despite the downgrade, bank stocks surged, with the SPDR Bank exchange-traded fund rising nearly 6.5% in morning trade, according to NBC News.

Moody’s claims that the pandemic-related fiscal and monetary stimulus, along with an extended period of low rates, have complicated bank operations.

Banks with sizable unrealized securities losses, as well as non-retail and uninsured US depositors, may still be at risk, according to Moody’s.

What You Should Know 

Moody’s predicts that the US economy will enter a recession later this year, putting additional strain on the financial sector.

Given Moody’s recent downgrade, it is clear that traditional banking systems are struggling to meet today’s demands and challenges.

As interest rates rise and the economy enters a recession, it is likely that more banks will fail, exposing more depositors.

The cut in outlook for the nation’s banking system came as Moody’s placed six US lenders on review for downgrade:

First Republic Bank, Western Alliance Bancorp, Intrust Financial Corp., UMB Financial Corp., Zions Bancorp and Comerica Inc.

The credit-rating company cited concerns including unrealized losses in the lenders’ asset portfolios and risks to profitability.

Read more: First Republic, Five US Banks Put on Downgrade Watch by Moody’s

A Moody’s downgrade preceded SVB’s collapse. On March 8, the company cut the ratings of SVB and its bank subsidiary.

With Silicon Valley Bank’s long-term local currency bank deposit rating downgraded to A1 from Aa3, and its issuer rating cut to Baa1 from A3.

The outlook for both ratings was lowered to negative from stable.

What People Is Saying

Some cryptocurrency enthusiasts believe that the 2008 financial crisis inspired the creation of cryptocurrency, particularly Bitcoin.

In response to the impending financial crises and bank failures, the price of Bitcoin has risen to its highest level since June 2022, breaking the $26,000 barrier.

Twitter user @luke_broyles shared the opinion that this why more people should adopt Bitcoin:

Folks, get you some #Bitcoin and then get said #Bitcoin off the exchanges.

If banks or investors start seriously considering the possibility of "QE and FDIC infinity" #Bitcoin is going much higher than $25,000 and is never going back down.

Be cautious.https://t.co/dlxtSfpZSE

— Luke Broyles (@luke_broyles) March 14, 2023

For crypto enthusiasts, Blockchain-based assets such as Bitcoin are a great alternative to the failing traditional banking system.

Trezor Bitcoin analyst Josef Tětek, shared that the current sharp rise of Bitcoin’s price appears to be a direct result of the “apparent fragility of the banking system.”

Tětek noted that the current banking crisis could potentially make Bitcoin emerge as a safe haven and risk-off asset.

He emphasized that Bitcoin was created soon after the world encountered the financial crisis of 2008 and was “likely a response to the unfairness of bailouts.”

According to Tětek, the recent bank failures clearly show that counter-party risk in the banking system is a “serious problem,” though it is sometimes well hidden. He said:

“Banks no longer actually hold our money, but lend it out and buy volatile assets with it. Depositors are, in fact, the banks’ creditors. Understandably, people are looking for alternatives such as Bitcoin.”

Many technology enthusiasts believe that blockchain-based finance and cryptocurrencies such as Bitcoin can play a critical role in mitigating the risks of traditional banking.

And ensuring that individuals and businesses have access to the financial services they require by providing a more secure, transparent, and efficient financial system.