PacWest Stock Plummets as Banking Crisis Fears Reignite

PacWest Stock Plummets as Banking Crisis Fears Reignite

By:Thomas Westwater

PacWest Signals Banking Crisis Not Over Yet

Jerome Powell, head of the U.S. Federal Reserve, said on Wednesday during his FOMC press conference that the U.S. banking system is "sound and resilient." Yet just hours after Mr. Powell uttered those words, on Wednesday, another bank, PacWest Bancorp ($PACW), announced that it was in talks with investors about its strategic options as its stock price plummeted.

Shares of PACW accelerated lower on Thursday, dropping a staggering 50% to $3.20 a share in early-morning trading. The stock was trading at $28 per share back in March. Despite the efforts by regulators and the U.S. Central Bank Chief to assuage the public over the banking crisis, it appears that the troubles in the banking system are ongoing.

pacwest stock price

Contagion Risk Spreading in Market

This fear is rippling into the banking sector and the broader markets. Through mid-morning trading, SPDR Regional Banking ETF KRE traded down over 6% to its lowest level since September 2020, and the Dow Jones Industrial Average (/YM) lost over 300 points or 0.96%. Meanwhile, the Cboe’s VIX Index rose above the 20 mark for the first time since early April.

Meanwhile, another regional bank--Western Alliance ($WAL), an Arizona-based regional bank—is down nearly 30% halfway through the Wall Street trading session. The bank is off its lows after refuting a Financial Times article claiming the bank was exploring a sale, saying that the report is “categorically false,” per FT.

western alliance stock

Regulators Need to Take Action to End the Banking Crisis

JPMorgan Chase assumed control of First Republic recently, and some assumed it would put the crisis to rest, but Americans remain wary of regional banks. Some are transferring their deposits to larger institutions, believing that those banks are too big to fail and thus immune from a catastrophe. Others moved deposits into money-market funds, which pay more interest versus traditional savings accounts.

One solution would be for the FDIC to up the $250,000 coverage limit for deposits. Nelson Peltz, who runs the Trian Fund Management, proposes in a Financial Times piece that a small insurance premium for those with balances over that limit could stem the outflow from regional banks. Earlier this week, the FDIC recommended changes to the banking system, including raising insurance limits for business accounts to cover payroll operations for small- and medium-sized businesses, which the FDIC as around $2.5 million. For now, however, volatility in regional bank stocks is likely to continue.

commercial banks total deposits
Image Source:

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.