The banking crisis in the US looks far from over. Los Angeles-based bank holding company PacWest Bancorp is reportedly exploring strategic options, including a sale or capital raising, fuelling concerns about a possible collapse
According to reports, PacWest is hoping to avoid the fate of other regional lenders that were taken over by US regulators in the last two months. It aims to find a solution that bolsters its finances
PacWest, which has branches in California as well as Durham, North Carolina, and Denver, Colorado, had raised $1.4 billion from investment firm Atlas SP Partners in late March
PacWest shares fell 52% and Western Alliance saw a decline of 23% after reports. Other regional lenders under pressure also fell, including Zion Bancorp, Comerica, and First Horizon. PacWest stock has lost around 90% of its value since the banking crisis started on March 8
Earlier this week, First Republic Bank was seized by regulators and sold to JPMorgan Chase on Monday, making it another casualty of the banking crisis that has seen other troubled lenders collapse in the US this year
Silicon Valley Bank, one of the most prominent lenders to technology start-ups and venture capital firms, was the first to implode in the US banking crisis on March 10, 2023
The abrupt closure of Silicon Valley Bank, followed by social media-fuelled speculation, started off a regional bank crisis, leading regulators to step in with emergency measures
Regulators seized Silicon Valley Bank, and later, Signature Bank, a New York financial institution with a large real estate lending business. The panic led to Wall Street’s biggest banks stepping in to give $30 billion to First Republic and UBS’s takeover of the Swiss bank Credit Suisse
Former Federal Reserve Bank of Dallas President Robert Kaplan recently said in an interview that the regional banking crisis in the US may be more serious than commonly believed. He called for the Fed to pause its rate hiking cycle to give policymakers more time to address the risks
Despite the banking crisis, the Federal Reserve on Wednesday went for another rate hike of 25 basis points to cool down persistently high inflation. Since the Fed launched the current tightening cycle in March 2022, policymakers have raised rates by 475bps, the fastest pace of raising rates since the 1980s
Famous bond trader Jeffrey Gundlach, CEO of DoubleLine also said in a media interview recently this is not the last chapter in this regional banking problem. His statement came after the US Fed raised rates to the highest level since 2007
Banking veteran Uday Kotak noted that the hike can lead to risks for regional US banks. "US Fed increases overnight rates to 5-5.25%. 10 year 3.33%. Inverted yield curve. Money market funds offer 5%+. Risks to regional US banks. PacWest bank drops- 50% post market. Liquidity moves worldwide to funds, short term treasuries. Systemic banking stability is crucial," tweeted Kotak