They also played a role in the slowdown in the tech industry, which had major implications for West Coast banks such as Silicon Valley.Ĭhair Jerome Powell said the Fed would monitor several factors, including the turmoil in the banking sector, in deciding its next move on rates. The higher rates have prompted depositors to move money into higher-paying certificates of deposit and money market funds. The Fed on Wednesday raised its key interest rate by a quarter-point to the highest level in 16 years as part of that campaign, its tenth consecutive rate hike. The Federal Reserve’s fight against inflation has played a key role in the banking turmoil. US officials at the federal and state level are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, Reuters reported Thursday citing an unnamed source familiar with the matter. Zions Bancorp dropped 10 percent, Comerica fell 12 percent, and Ke圜orp fell more than 6 percent. Other regional banks come under selling pressure Thursday morning. “Western Alliance is not exploring a sale, nor has it hired an advisor to explore strategic options,” a bank spokesperson said. Thursday morning, The Financial Times reported that the bank was also considering strategic options. The Phoenix-based bank put out a statement overnight saying it has not experienced any unusual withdrawals and its plans to readjust its balance sheet were under way. Western Alliance shares were among the most volatile and were down 39 percent when trading was halted. Toronto-Dominion Bank had said in February that it was buying regional bank First Horizon in a $13.4bn all-cash deal. TD Bank Group and First Horizon Corp said they called off a planned merger, citing regulatory hurdles. In another sign of potential trouble for the banking industry, a major deal was called off Thursday. All assets of Silicon Valley, Signature and First Republic were bought after regulators seized these institutions and their remnants were transferred to the Federal Deposit Insurance Corporation. Healthier banks have been reluctant to step in to buy struggling lenders. Nearly all have large amounts of low-interest bonds and commercial real estate assets on their books, and would record losses if they sold them on the open market. The regional banks that have run into trouble have seen heavy outflows of deposits and need to raise capital. Still, investors feared that PacWest’s fate could mirror that of another California bank - First Republic - which spent weeks looking for a buyer before failing Monday. The bank experienced significant deposit outflows after Silicon Valley Bank failed in mid-March, but said deposits have increased since March 31, including in its venture banking division, which serves technology and start-up companies. With $44bn in assets, PacWest is roughly one-fifth the size of the three regional banks that failed over the past two months - Silicon Valley Bank, Signature Bank and First Republic Bank. PacWest, based in Los Angeles, said in a statement that it was not experiencing any out-of-the-ordinary deposit withdrawals and still plans on selling off some assets to free up cash on its balance sheet. Shares of smaller regional lender PacWest Bank plunged nearly 50 percent Thursday after the company confirmed reports that it was considering “strategic options,” that may include the possible sale of the company. Uncertainty continued to pummel the banking industry, despite assurances from financial regulators and bankers such as Jamie Dimon that the worst of the recent crisis is over and the health of the banking system remains strong.
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