Aug 22 Reuters SP Global cut its credit ratings and outlook on multiple U.S. regional banks on Monday, saying higher funding costs and troubles in the commercial real estate CRE sector would likely test their credit strength.

A sharp rise in interest rates by the U.S. Federal Reserve is fueling liquidity concerns as costs tied to funding deposits surge, the SP said in a summarized note.

The agency cut its ratings on Associated BancCorp and Valley National Bancorp on funding risks and higher reliance on brokered deposits, while UMB Financial Corp, Comerica Bank and KeyCorp were downgraded on large deposit outflows and prevailing higher interest rates.

KeyCorp shares were down marginally in premarket trading.

The outlook of ST Bank and River City Bank was cut to negative from stable by the SP, citing higher CRE exposure.

The agency39;s action will make borrowing costlier for the ailing banking sector that is looking to shake off the effects of the crisis from earlier this year, when the collapse of Silicon Valley Bank and Signature Bank sparked a loss of confidence and led to a run on deposits at several regional lenders.

Borrowing costs globally have also surged, with the U.S. Treasury yields hitting their highest in 16 years as the bond market rout entered its sixth week on Tuesday, even as U.S. stock index futures gained, boosted by megacap growth stocks.

Moody39;s had earlier this month cut its ratings on 10 U.S. banks by a notch and placed six, including Bank of…