: Fitch lowers operating environment score for banks by one notch to aa- with stable outlook

Fitch Ratings analyst Christopher Wolfe on Thursday reduced his firm’s operating environment rating for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector. Wolfe cited “structural uncertainty around the path and rate of monetary tightening and gaps in the regulatory framework” for the downgrade. The outlook on the firm’s aa- operating environment rating is stable, with little or no expectation that it will be cut at any time in the medium term. Fitch would consider a further operating environment rating cut in the face of additional uncertainty around the macro environment, failure by banks to address regulatory gaps, or high private-sector indebtedness and a higher-for-longer interest rate scenario. Banks stocks are rising on Thursday, with the KBW Nasdaq Bank Index BKX up by 0.6%, the S&P Regional Banking exchange-traded fund KRE up by 0.4% and the Financial Select SPDR ETF XLF up by 0.2%.

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