Moody's lowers rating of Silicon Valley Bank amid sudden demise

By Ovunc Kutlu

ISTANBUL (AA) – Moody's has lowered the ratings of Silicon Valley Bank (SVB) and its parent firm SVB Financial Group amid the sudden demise that caused turmoil in US financial markets this week.

SVB's long-term local currency bank deposit was downgraded to "Caa2" from "A1" and its issuer rating was lowered to "C" from "Baa1," while outlook remains negative, the global rating agency said late Friday in a statement.

The "Caa2" rating is regarded as "poor quality and very high credit risk" and "C" is referred to as "the lowest quality and usually in default."

Moody's said the downgrades are result of the closing of SVB earlier Friday by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver.

"The closure of the bank follows Silicon Valley Bank's public announcement of a plan to restructure its balance sheet. The bank announced it had sold its available for sale securities at a $1.8 billion loss. However, the bank did not complete the planned capital raise associated with its balance sheet restructuring plan," the statement said.

"The key drivers of SVB's failure was significant interest rate and asset liability management risks and weak governance. The significant deterioration in SVB's funding and profitability profile reflects high risk in its financial strategy and risk management," it added.

SVB, the commercial bank headquartered in Santa Clara, was the largest bank in Silicon Valley based on local deposits and it was among the biggest banks in the nation.

It had approximately $209 billion in total assets and around $175.4 billion in total deposits as of the end of 2022, while it sold this week its $21 billion bond portfolio at a $1.8 billion loss.