CRE loans spark banking crisis; 5 US banks downgraded to "negative."

On March 26,Forex foreign exchange app download Eastern Time, S&P Global, a globally renowned rating agency, downgraded the rating outlook of five regional banks in the United States to "negative." Now, a total of nine banks in the United States have a negative rating, accounting for 18% of the evaluated banks. S&P Global attributed this decision mainly to "a significant exposure to commercial real estate" for most of these banks.

This simultaneous downgrade of five banks undoubtedly garnered the attention and concern of many investors. In recent years, the United States has been negatively affected by commercial real estate loans. This is partly due to the continuous increase in borrowing costs for the real estate sector caused by the Federal Reserve's rate hikes, and partly due to a decline in rental occupancy rates and an increase in bad debt ratios as a result of economic downturns, leading to higher default rates on commercial real estate loans.

The downgrading of the ratings of First Commonwealth Financial, M&T Bank, Synovus Financial, Trustmark, and Valley National Bancorp from "stable" to "negative" had a significant impact, according to S&P. The problems were not limited to these five banks alone; instead, these banks were among those with the largest exposure to commercial real estate loans, and other banks were also severely affected.

Banks have been revealing related issues successively since a year ago, but those issues never received widespread attention and recognition until early February this year. Following the acquisition of the bankrupt Signature Bank by New York Community Bancorp, it also faced severe difficulties, cutting its dividend by 70% after announcing earnings far below expectations at the end of January, leading to a stock price plunge of over 40%, with a cumulative decline of more than 60% by mid-February.

In the first half of 2023, the continuous bankruptcies and closures of banks such as Silicon Valley Bank, Silvergate Bank, and the previously mentioned Signature Bank have happened. Despite the U.S. authorities' multiple attempts to stabilize market confidence, their efforts have been largely ineffective, with the gloom continuing to this day.

Bank closures often signify the first step towards an economic collapse, making even the general public pay attention to such news. The last time the United States experienced a large-scale wave of bank closures and credit bankruptcies was during the financial crisis of 2008.

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