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US Banking Crisis Continues as Moody’s Downgrades Leading Institutions

2 mins
Updated by Kyle Baird
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In Brief

  • Moody's downgrades ten US banks, flags six more for potential downgrades due to persistent funding risks.
  • The credit rating agency predicts a mild US recession in early 2024, with declining asset quality in banks.
  • US household debt hits a record $17.1tn, with $12tn in mortgages, $1.6tn each in auto and student loans.
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The banking crisis in America is far from over, as leading ratings agencies continue to flag big banks citing funding risks. Moody’s has downgraded several banks this week while issuing warnings over potential downgrades for more. 

On Aug. 8, it was reported that credit rating agency Moody’s had downgraded ten small to mid-sized U.S. banks. 

US Banking Crisis Deepens

The downgraded banks were Commerce Bancshares, BOK Financial Corporation, M&T Bank Corporation, Old National Bancorp, and Prosperity Bancshares. Furthermore, Amarillo National Bancorp, Webster Financial Corporation, Fulton Financial Corporation, Pinnacle Financial Partners, and Associated Banc-Corp were downgraded. 

In addition to the ten banks that dropped a rank, six banking giants were flagged for potential downgrades. These included Bank of New York Mellon, US Bancorp, State Street, and Truist Financial, according to Reuters.

Additionally, the credit rating agency shifted the outlook of eleven banks from stable to negative. 

To learn more about how the brewing banking crisis in the United States, read our explainer here: 2023 US Banking Crisis Explained: Causes, Impact, and Solutions 

Moody’s commented: 

“Many banks’ second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital.”

It claims that a mild US recession is on the horizon for early 2024. “Asset quality looks set to decline,” it stated, adding that there were “particular risks in some banks’ commercial real estate portfolios.”

Moody’s highlighted that the catalysts of the banking crisis earlier this year are still present. 

Banks are still at risk of a withdrawal rush and current high interest rates are impacting investments banks made when rates were low. 

US stock markets fell on Aug. 8 as Wall Street digested the latest banking bunkum.

Looming Debt Disaster  

Moreover, the move comes a week after the US currency was downgraded by the Fitch ratings agency. 

The downgrade reflects the “expected fiscal deterioration over the next three years,” said Fitch before adding that there was a high and growing general government debt burden.

On Aug. 9, global capital markets outlet the Kobeissi Letter reported on the looming debt disaster.

It revealed that the United States now has a record $17.1 trillion in household debt and a record $12 trillion in mortgages. Furthermore, there is a record $1.6 trillion in auto loans, $1.6 trillion in student loans, and a record $1 trillion in credit card debt.

“We are fighting inflation with debt. This can’t end well,” it concluded. 

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...