Moody’s puts First Republic on downgrade watch on outflow risk

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(Bloomberg) — Moody’s reviewed all long-term ratings on First Republic Bank as the Silicon Valley bank’s downfall the region.

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“The review for downgrade reflects extremely unstable funding conditions for some US banks at risk of disproportionate deposit outflows,” Moody’s said in a statement.

“The rating may be downgraded if the bank’s deposit base declines markedly, triggering asset sales, loss crystallisation and greater reliance on market funding,” it said.

The assessment comes after US bank stocks tumbled on Monday. Among them was San Francisco-based First Republic, which tried to reassure investors with a statement about the strength of its liquidity.

Investors are questioning whether the US government’s hurried weekend rescue plan for the banking system will be enough to stem the fallout from the collapse of Silicon Valley Bank.

Moody’s also said, “The bank may need to sell assets if it faces higher-than-anticipated deposit outflows and liquidity backstops prove insufficient.”

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