Moody's Cuts Signature Bank's Rating To Junk

signaturebank mar14 lt

Moody's Investors Service has downgraded the ratings of the collapsed Signature Bank to junk, and will withdraw its ratings for business reasons.

The rating agency also put the following six banks under review before deciding on downgrading them - First Republic Bank, Zions Bancorp., Western Alliance Bancorp, Comerica Inc, UMB Financial Corp and Intrust Financial Corp.

The move follows the closing of Signature Bank by the New York State Department of Financial Services or NYDFS after significant deposit outflows, following the failure of Silicon Valley Bank. NYDFS appointed the Federal Deposit Insurance Corp. or FDIC as Signature Bank's as well as Silicon Valley Bank's receiver.

Signature Bank was closed by the NYDFS following a systemic risk exception jointly announced by the Federal Reserve, FDIC, and Department of Treasury on March 12.

The bank's closure was related to significant deposit outflows related to contagion from Silicon Valley Bank's failure and the company's cryptocurrency deposit concentration and large amount of uninsured deposits. This made the bank's funding profile more sensitive to rapid and large withdrawals from depositors.

In the latest development, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to a newly created, full-service FDIC-operated 'bridge bank', Signature Bridge Bank, N.A. Silicon Valley Bank's all deposits and substantially all assets were also transferred to FDIC-operated bridge bank, Silicon Valley Bank, N.A.

In a statement, Moody's said the withdrawal of Signature Bank's deposit ratings and other assessments was based on the transfer of its obligations to the bridge bank.

Moody's said the Signature Bank's standalone baseline credit assessment or BCA and adjusted BCA were downgraded to c from baa1. The local currency subordinate debt and long-term issuer ratings were downgraded to C from Baa2. The local currency Pref. Stock Non-cumulative was downgraded to C (hyb) from Ba1 (hyb).

Moody's also withdrew Signature Bank's long-term and short-term local currency bank deposit ratings of A2/Prime-1; the long-term and short-term local and foreign currency Counterparty Risk Ratings of Baa1/Prime-2; and the long-term and short-term Counterparty Risk Assessments of A3(cr)/P-2(cr).

Reflecting Moody's views of the negative governance risks, Signature Bank's governance issuer profile score was changed to G-5 from G-2 and its ESG credit impact score to CIS-5 from CIS-2, indicating the discernable negative impact of governance risks on the bank's ratings.

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