Moody's downgrades several regional US banks

investmentweek.co.uk:

'Most US banks are subject to lower regulatory capital requirements than the largest US banks.'

These include Allfirst Preferred Assets and Capital trusts, Frist Maryland Capital I and II, M&T Bank Corporation, Manufacturers and Traders Trust Company, People's United Banks and People's United Financial, Wilmington Trust Company and Wilmington Trust, National Association.

Moody's said the downgrades reflected «several sources of strain on the US banking sector», including funding pressures, regulatory capital weaknesses and rising risks associated with commercial real estate exposures.

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The decline in the stability of the banks' deposit funding and an increase in funding costs in Q2 were also cited as reasons leading to the rating cuts.

Moody's added: «Most US banks are subject to lower regulatory capital requirements than the largest US banks. In the current environment, this leaves some US banks, especially those with sizable economic losses due to higher interest rates that are not reflected in their regulatory capital ratios, less resilient and more vulnerable to a loss of investor confidence, which is credit negative for these institutions.»

The agency's spotlight on the quality of the banks' capital was emphasised due to its macroeconomic outlook forecasting a US recession «sometime over the next year».

However, small and medium-sized banks were not the only targets.

Today (8 August), Moody's placed six large US banks under review for downgrade, again citing funding pressures and potential regulatory capital weaknesses. These include BNY Mellon, US Bancorp, Truist Financial, State Street, Northern Trust Corporation and Cullen Frost.

Moody's added: «Higher