Lauren Justice / Bloomberg via Getty ImagesIn a harsh blow to an already-reeling sector, Moody’s Investors Service on Monday cut its view on the entire banking system to negative from stable.
The move followed action late Monday, when Moody’s warned that it either was downgrading or placing on review for downgrade seven individual institutions. The Federal Reserve established a facility to ensure that institutions hit with liquidity problems would have access to cash. Treasury backstopped the program with $25 billion in funds and vowed that depositors with more than $250,000 at SVB and Signature would have full access to their funds.
SVB, for instance, found itself with some $16 billion in unrealized losses from long-dated Treasurys it held. As yields rose, it eroded the principle value of those bonds and created liquidity issues for the bank, long a favorite of high-flying tech investors that couldn’t get financing at traditional institutions. SVB had to sell those bonds at a loss to meet obligations.
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