S&P Downgrades Some Big Name Banks  

• S&P Global Ratings is downgrading the credit ratings of five banks, including some of the nation's largest lenders: Associated Banc Corp; Comerica Inc.; KeyCorp; UMB Financial Corp.; and Valley National Bancorp.
• The credit agency pointed to "tough operating conditions" that are straining the banking industry and also lowered its rating for two other banks. In explaining its rationale for the downgrades, S&P noted in a report on Monday that banks are facing risks that could make them "less resilient than similarly rated peers."
• The move comes only two weeks after Moody's cut the credit ratings of 10 small and midsize banks because of growing financial risks and strains that could erode their profitability. Both credit ratings agencies are taking the steps in the wake of a banking crisis that began in March when Silicon Valley Bank, once the country's 16th largest bank, collapsed just days after depositors grew fearful of its solvency and made a classic bank run.
• Underpinning the banking downgrades is a drastically changed lending environment compared with early 2022 before the Federal Reserve began driving up interest rates to fight high inflation. Today's higher borrowing costs mean that banks must pay more interest to depositors, while the value of some bond assets has slumped.
• "The sharp rise in interest rates and quantitative tightening deployed since March 2022 to combat high inflation are weighing on many U.S. banks' funding, liquidity and spread income," S&P said in its report. "These factors have also caused the value of banks' assets to fall and raised the odds of asset quality deterioration."

(Source: CBS News)