Fitch warns of potential downgrade for US banks

The news: A Fitch Ratings analyst has warned that US banks are at risk of a downgrade if the agency further cuts its assessment of the operating environment for the industry, CNBC reports.

The numbers: A one-notch downgrade to A+ from the current AA- would force Fitch to reevaluate ratings on each of the more than 70 US banks it covers, analyst Chris Wolfe told CNBC. The news prompted a 2.75% slide in the S&P 500 banking index and a 3.4% drop in the KBW regional banking index on Wall Street.

The context: Fitch lowered the score of the US banking industry's operating environment to AA- from AA in June, citing pressure on the country's credit rating, gaps in regulatory framework and uncertainty about the future trajectory of interest rate hikes. Another one-notch downgrade would force it to reevaluate ratings. The sector has already been rocked earlier this month after Fitch's peer Moody's downgraded 10 mid-sized US banks and warned it may cut ratings of several others.