Moody’s downgrades US banks

The news: Ratings agency Moody’s has downgraded the credit ratings of several small and mid-sized U.S. lenders and warned the sector's strength will be tested by funding risks and weaker profitability.

The numbers: Moody's cut the ratings of 10 banks by one notch and placed six large banks including Bank of New York Mellon, US Bancorp and State Street on review for potential downgrades. The agency also changed its outlook to negative for eleven major lenders.

The context: Moody’s said the recent results of several U.S. banks showed growing profitability pressures that will reduce their ability to generate internal capital and warned that asset quality looks set to decline due to high interest rates. The downgrade has reignited fears about the health of the U.S. banking sector which had seemingly recovered from the collapse of Silicon Valley Bank and Signature Bank earlier this year.