Nonbank players are experiencing “knock-on effects” as the result of the sudden deterioration of a few U.S. banks, Fitch Ratings said.
Nonbank financial institutions, insurers, and funds are experiencing a variety of “knock-on effects” as the result of the sudden deterioration of a few U.S. banks, underscoring the interconnectedness of the entire financial system, according to Fitch Ratings. In a statement on Wednesday, Fitch described these impacts as “not yet material from a rating perspective.
In a statement on Wednesday, Fitch described these impacts as “not yet material from a rating perspective.” A number of the second-order effects are related to asset-price volatility, increased scrutiny of unrealized losses, and other factors that could ultimately impact the ratings of those nonbank players, the agency said.
Insurance companies rated by Fitch, for example, have about $1.16 billion of debt and equity-exposure to now-failed banks — mostly concentrated among life insurers. Among Fitch-rated funds, exposure to now-failed banks “appears to be confined to a limited number of bond funds, closed-end funds and local government investment pools,” the agency said, adding that “exposure amounts are limited, with no rating impacts expected.
Financial markets were reeling on Wednesday as worries about the banking sector reverberated following the recent closure of three banks — Silicon Valley Bank, Signature Bank and Silvergate Bank — and fresh troubles at Swiss giant Credit Suisse CS . Fitch is one of the Big Three credit credit-rating firms, along with Moody’s Investors Service and S&P Global Ratings.
The Dow Jones Industrial Average DJIA was down 373 points, or 1.2%, after falling more than 700 points at its session low. The S&P 500 SPX fell 0.9%, while the Nasdaq Composite COMP was off 0.1%.
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