Credit & Capital

Moody’s Flags 6 Additional Banks in Silicon Valley Bank Aftermath

Finance chiefs should be examining their banking partners for similarities to SVB's funding structure.
Moody’s Flags 6 Additional Banks in Silicon Valley Bank Aftermath

Silicon Valley Bank’s failure last week has precipitated an examination of the banking industry’s overall health, and which other banks may be susceptible to similar risk. 

Silicon Valley Bank (SVB), which would be the largest bank failure since Washington Mutual in 2008, has been a clarion call for CFOs to examine their organizations’ banking services, and how reliant they may be on single banks to do many of their daily transactions. Those who rely on private equity and venture capital in particular may be most susceptible. 

The Federal Reserve has established an emergency Bank Term Funding Program (BTFP) lending facility to immediately address bank liquidity while reducing contagion risk and rapid unmanageable deposit outflows.

But, as S&P Global Ratings wrote earlier this week, “despite the new Fed facility, the heightened confidence sensitivity in recent days may have led to an erosion in franchise value of some banks. We are also unsure whether depositors will immediately react to the Fed’s announcement by halting any deposit outflow they had previously planned.”

Even as the FDIC has assured depositors that uninsured deposits will be made whole, Moody’s Investor Service, which downgraded SVB only after it was shut down, has indicated it will also downgrade six additional banks, as reported by Four of those banks are in the chart above:

  • First Republic Bank (FRC)
  • Western Alliance Bancorp (WAL)
  • Intrust Financial (IFNC)
  • UMB Financial (UMBF)
  • Zions Bancorp (ZION)
  • Comerica (CMA)

Moody’s stated these have been reviewed for downgrade, likely due to the amount of uninsured deposits on their balance sheets, making them vulnerable to the kinds of withdrawals that undid SVB. 

The cash as a percentage of assets (see chart) of banks is also worth monitoring since cash is “the first line of defense against deposit outflows and a means of helping to manage interest-rate risk and earnings.”