In June, the ratings agency lowered the score of the US banking industry’s “operating environment” to AA- from AA, citing pressure on the country’s credit rating, gaps in regulatory framework and uncertainty about the future trajectory of interest rate hikes.

Another one-notch downgrade of the industry’s score, to A from AA-, would force Fitch to reevaluate ratings on each of the more than 70 US banks it covers, Wolfe told CNBC

“If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions,” Wolfe said.

The American banking industry was rocked earlier this month after Fitch’s peer Moody’s downgraded 10 mid-sized US banks and warned it may cut ratings of several others. 

Earlier in May, Fitch put the country’s “AAA” rating, its highest rank, long-term foreign-currency issuer default rating (IDR) on rating watch negative in a precursor to a possible downgrade if lawmakers fail to raise the amount that the Treasury can borrow before it runs out of money.

Fitch said that the failure to reach a deal “would be a negative signal of the broader governance and willingness of the US to honor its obligations in a timely fashion,” and would be unlikely to be consistent with a “AAA” rating.

“We believe risks have risen that the debt limit will not be raised or suspended before the X-date and consequently that the government could begin to miss payments on some of its obligations,” Fitch said.

In its report, Fitch said that the US reached its $31.4 trillion debt limit on January 19, 2023, and the Treasury began taking extraordinary measures in order to avoid breaching the ceiling.

Updated: 15 Aug 2023, 07:50 PM IST