Ratings giant Moody's yesterday warned of more pain ahead for the US banking system after a run on deposits led to the collapse of Silicon Valley Bank.
The firm cut its outlook for the sector to "negative" from “stable” - warning of "a rapid deterioration in the operating environment".
The downgrade came as many banking shares in the US and Europe rebounded following earlier losses.
But Moody's said some other banks faced risks of customer withdrawals.
It said rising interest rates also pose a challenge, exposing banks who bought assets such as government bonds when interest rates were low to potential losses.
"Banks with substantial unrealised securities losses and with non-retail and uninsured US depositors may still be more sensitive to depositor competition or ultimate flight," Moody's said in the report.
Pressures
"We expect pressures to persist and be exacerbated by ongoing monetary policy tightening, with interest rates likely to remain higher for longer until inflation returns to within the Fed's target range."
The BBC says authorities have acted quickly to try to contain fallout after the shock collapse of Silicon Valley Bank (SVB), the 16th largest in the US.
The firm, a key lender to technology firms, failed last week after a rush of customer withdrawals, sparked by the bank's disclosure that it needed to raise money and had been forced to sell a portfolio of assets, mostly government bonds, at a loss.
Officials from the Department of Justice and Securities and Exchange Commission are now investigating the collapse, US media reported.
Reports have suggested that some customers of smaller US banks have been trying to put their money into bigger institutions.
However, ratings agency S&P Global said it hadn't seen evidence of runs on banks other than at those that had collapsed.
Emergency measures
It said emergency measures brought in by the Federal Reserve should lower the risk of bank customers losing confidence.
However, it added that "conditions remain fluid" and "some banks are showing greater signs of stress than others", including First Republic bank.
Analysts expect the turmoil in the financial system sparked by the failures to lead the Fed to slow or pause its rate rises when it meets next week.
The three main stock indexes in the US climbed yesterday, with the Dow up 1%, the S&P 500 ahead 1.7% and the Nasdaq more than 2% higher.
FTSE 100
The UK's top share index, the FTSE 100, was down 34-points at 7,603 shortly after opening this morning, following yesterday's 88-point gain.
Brent crude futures were 1.28% higher at $78.44 a barrel.
Companies reporting today
- Full-year results: Balfour Beatty, Marshalls, Prudential