Banking crisis won’t hurt America’s credit rating unless stress intensifies, Moody’s says

By Matt Egan, CNN

The banking crisis that caused US officials to launch emergency interventions is unlikely to have significant direct costs for the federal government, according to Moody’s Investors Service.

The credit ratings firm said late Wednesday that at this stage, the biggest bank failures since 2008 are not expected to meaningfully hurt America’s credit profile.

“In particular, we do not expect significant direct fiscal costs” from the current banking sector stress, Moody’s wrote in a report.

However, Moody’s warned that an intensification of the banking crisis could be problematic.

“A scenario of severe and prolonged stress, which is not our current baseline, could weaken economic and fiscal strength,” Moody’s said.

The credit ratings firm added that a worsening crisis could cause it to downgrade its assessment of America’s institutions and governance strength if it were found that gaps in governance contributed to the stress or reduced the ability to contain it.

After the failures of Silicon Valley Bank and Signature Bank, the federal government came to the rescue of uninsured depositors and launched a new lending program aimed at preventing other banks from imploding.

“When there are cracks in confidence in the banking system, the government must act immediately. This includes making forceful interventions — like we did,” US Treasury Secretary Janet Yellen said in prepared remarks to be delivered on Thursday.

“As I have said, we have used important tools to act quickly to prevent contagion. And they are tools we could use again,” according to her statement.

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