Bank / Credit Union

Fitch warns of possible bank downgrade

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August 15, 2023

Fitch Ratings has warned that banks, including JPMorgan Chase, may face ratings downgrades. It reduced its overall assessment of the banking industry's health in June from AA to AA- and recently downgraded 10 small and midsized banks, according to a report by CNBC.

The agency brought rates down due to the failures of multiple banks in March and uncertainty regarding interest rates. It has also warned that banks such as Truist and U.S. Bank may see cuts as well.

If the overall health of the banking industry is downgraded to A+, then other banks such as JPMorgan Chase and Bank of America would also be cut, which may in turn push some of the weaker lenders to non-investment grade status.

The agency's actions will in large part depend on how the Federal Reserve handles interest rates, which are at a historic high. Some analysts have suggested that the Fed may stop hiking rates, but that isn't certain.

"What we don't know is, where does the Fed stop? Because that is going to be a very important input into what it means for the banking system," Chris Wolfe, analyst, said in the report.