Roughly ten days ago, the credit agency Moody’s Investors Service downgraded the U.S. banking sector from “stable” to “negative.” In a recent update on Thursday, the company stated that there is still a risk to the U.S. economy. The managing director of credit strategy at Moody’s explained that the country “will be unable to curtail the current turmoil,” and it could spread “beyond the banking sector.”
Moody’s Analysts Anticipate Greater Financial and Economic Damage From U.S. Banking Spillover Effects
In a note sent out on Thursday, Moody’s managing director of credit strategy Atsi Sheth explained that the U.S. may not be able to contain the banking turmoil that started two weeks ago. The commentary follows Moody’s recent downgrade of the U.S. banking industry, which was slashed from “stable” to “negative.” The credit agency applied the downgrade after three major U.S. banks collapsed, and the contagion spread to other U.S. banks and a few international financial institutions.
“The risk of the financial disruption spilling over could unleash greater financial and economic damage than we anticipated,” Moody’s analysts wrote. According to Moody’s, banks are not the only financial institutions that can be hurt by the Federal Reserve’s consistent rate hikes. “Market scrutiny will focus on those entities that are exposed to similar risks as the troubled banks,” Moody’s explains.
The credit agency added:
[U.S. officials] will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector.
The note from Moody’s credit analysts is similar to the warning Fitch Ratings gave last week
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Author: Jamie Redman
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