In a harsh blow to an already-reeling sector, Moody's Investors Service cut its view on the entire banking system to negative from stable.

The firm, part of the big three rating services, said Monday it was making the move in light of key bank failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis.

"We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY," Moody's said in a report.

The move followed action late Monday, when Moody's warned it either was downgrading or placing on review for downgrade seven individual institutions.

The moves are important because they could impact credit ratings and thus borrowing costs for the sector.

In its downgrade of the entire sector, the rating agency noted the extraordinary actions taken to shore up impacted banks. But it said other institutions with unrealized losses or uninsured depositors still could be at risk.