For just over a month, global concerns about the stability of the financial system following the collapse of two regional banks from USAfrom Silicon Valley Bank (SVB) and signature bank. Now American banks efforts are being made to put these painful episodes behind them, but it is far from clear whether the situation has stabilized or if this is just the calm before the storm. Tomorrow, the Fed’s conclusion is expected on the reasons that led to the collapse of the SVB.

As noted in the related CNN report, if we look at the level of bank deposits, at first glance it may seem convincing that banks are now in a better position than before. However, according to Ana Arsov, its CEO Moody’s, the picture is rather misleading, and the banking crisis is not over yet. As she points out, Moody’s Investors Service made an unusual move last week, simultaneously downgrading the ratings of 11 regional banks. Among them Bank of the First Republic, US Bancorp, Western Alliance and Zions Bancorp. The main reasons cited were problems with their asset-liability ratio, their exposure to the hard hit real estate sector, and their declining capital adequacy. And the problem is that in order to strengthen their capital position, these banks have to pay higher interest rates for attracting deposits.

This means that they will have a limit on the amount of capital they can raise as this will reduce their profitability. According to Ana Arsov, “This does not mean that they will experience a deposit outflow similar to what we saw in the case of Silicon Valley, but that banks remain more vulnerable to shocks.”

After the collapse of SVB and Signature Bank, the largest US banks, Bank of America JPMorgan Chase and Citibank, received record inflows of funds from regional and mid-sized banks. Their origin is understandable, as during the first quarter, deposits also from regional First Republic Bank declined 41% to $104.5 billion. However, deposit mobility has remained stable since the end of March, its managing director, Michael Roffler, notes.

According to the Federal Reserve, the same is true for all US banks, large and small. As of April 21, the First Republic’s total deposits stood at $102.7 billion, including $30 billion received from major US banks. This is 1.7% less than at the end of March, although, according to Michael Roffler, this slight decrease reflects “seasonal tax payments from bank customers.” A move to tighter monetary policy, launched a year ago by the Federal Reserve to curb inflation, has partly precipitated the banking crisis. And this is because the Federal Reserve is raising interest rates by selling securities and, in particular, US government bonds. However, at the same time, the price of bonds falls, and their yield rises.

SVB began to feel a lot of pressure because most of its clients’ funds were placed in bonds. The situation began to get problematic when his investors, mostly startups and technology companies, began withdrawing funds, since there were no other sources of funding. To satisfy their demands for large withdrawals, SVB was forced to sell the bonds, but at prices that incurred a loss of nearly $2 billion.

According to Christopher Wolf, head of Fitch Ratings’ North American banking division, the situation with SVB was quite extreme. Its customer base was undiversified, most deposits were uninsured, and the bank invested nearly all in long-term US Treasury bonds. As Christopher Wolf points out, the result was that it was more vulnerable to higher interest rates than other banks. Many banks and their depositors breathed a sigh of relief when the US government announced that it would guarantee all deposits, including those that exceed the US $250,000 deposit insurance limit.

Thus, the panic caused by the collapse of the SVB has somewhat decreased. But many banks are still trying to get back the deposits they lost after the SVB collapse, as well as those that many Americans withdrew and continue to withdraw to cope with the rising cost of living. And, as Christopher Wolf points out, the Fed’s expected new rate hike is likely to trigger further massive withdrawals.