Moody’s puts First Republic on downgrade watch for outflow risk

(Bloomberg) – Moody’s has put all of First Republic Bank’s long-term ratings to the test as Silicon Valley Bank’s collapse reverberates across the sector.

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“The review of the downgrade reflects extremely volatile funding conditions for some U.S. banks, which are at risk of uninsured deposit outflows,” Moody’s said in a statement, citing a “material” amount of deposits above the federal deposit threshold Insurance Corporation.

“Ratings could be downgraded if the bank’s deposit base has eroded significantly, leading to asset sales, loss crystallization and greater reliance on market funding,” it said.

The assessment comes after US bank stocks slipped on Monday. Among them was the San Francisco-based First Republic, which had tried to reassure investors with a statement about the strength of its liquidity.

Investors are wondering if the US government’s hastily assembled weekend bailout plan for the banking system will be enough to stem the fallout from the Silicon Valley bank collapse.

“Should the bank face higher-than-expected deposit outflows and liquidity support prove inadequate, the bank could have to sell assets,” Moody’s said.

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