By Lananh Nguyen and Tatiana Bautzer
NEW YORK (Reuters) – Ratings agency Moody’s (NYSE: MCO) said the U.S. banking sector is still strong even after it downgraded several small to mid-sized lenders and warned it might cut the ratings of several major banks.
“What we’re doing here is recognizing some headwinds – we’re not saying that the banking system is broken,” Ana Arsov, managing director of financial institutions at Moody’s, told Reuters in an interview.
An S&P index of bank stocks slid 2% after Moody’s took action on 27 lenders on Monday, highlighting the challenges of higher interest rates, climbing funding costs and a looming recession that would weigh on profits.
“As you look ahead, it doesn’t feel like the pressure from interest rates being higher and overall monetary policy tightening is close to abating,” said Jill Cetina, an associate managing director at Moody’s.