Report on Silicon Valley Bank Collapse: 6 US banks are under review by Moody’s
As a result of Silicon Valley Bank’s collapse, Moody’s Investors Service has reviewed First Republic Bank and five other US lenders for downgrades.
Moody’s also put Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp., and Comerica Inc. under review. A credit rating company said lenders were relying too heavily on uninsured deposit funding, and their asset portfolios had unrealized losses.
The move comes after US bank stocks were pummeled, even as the government rescued SVB’s depositors and unveiled a new lending facility to support lenders’ financing and prevent more bank runs. Following Signature Bank’s weekend closing, Moody’s also downgraded it and revoked its credit rating.
San Francisco-based First Republic tumbled 62% on Monday, while Phoenix-based Western Alliance fell an unprecedented 47%. Dallas-based Comerica fell 28%.
First Republic’s funding profile is more sensitive to rapid, large withdrawals because of its share of deposits that exceed the Federal insurance threshold.
A bank may have to sell assets if deposit outflows exceed expectations and liquidity backstops fail, Moody’s said. In December, the bank’s common equity tier-1 capital was made up of more than a third of available-for-sale and held-to-maturity securities, the bank said.
Through additional liquidity from the Federal Reserve and JPMorgan Chase & Co., First Republic has enhanced and diversified its financial position.
In response to the collapse of Silicon Valley Bank, the global bank stock rout has intensified. Although Joe Biden has pledged to guarantee deposits’ safety, this has done little to calm market jitters.