While 2023 began on a positive note for the cryptocurrency realm, little did everyone know that the banking realm was in for a downward spiral. The community has witnessed the downfall of Silvergate Bank, Silicon Valley Bank, and Signature Bank.
Recently, Credit Suisse Bank was also under scrutiny following the plummeting of its shares; this followed a statement by its largest shareholder. Moody’s Investors Service also recently cut the US banking system’s outlook to negative from stable. This is primarily due to the downfall of SVB, which is considered one of the largest banking failures after the 2008 financial crisis.
According to the latest reports, S&P has downgraded First Republic Bank’s rating to “junk.” S&P analysts Nicholas Wetzel and Rian Pressman wrote:
“The bank’s business position will suffer after the volatile swings in its stock price and heightened media attention surrounding deposit volatility. Its business stability has weakened as market perceptions of its creditworthiness have declined.”
First Republic Bank stock is down by 8.15%
At press time, the stock price of First Republic Bank had dropped by 8.15% and stood at $36.4. S&P downgraded the bank on outflow risk. The top three rating companies, Standard & Poor’s (S&P), Fitch, and Moody’s, assess the creditworthiness of bonds. Bonds with a poor credit rating are referred to as junk bonds or non-investment grade bonds.
S&P cut the rating to BB+ from A-, stating the elevation of outflow risk even amidst a situation of increased borrowing availability. The move from S&P is also a follow-up to the US regulators pledging support for the banking realm.