Banking crisis continues
First Republic Bank, seized and sold to JPMorgan Chase on Monday, was supposed to be the last victim of the US financial-sector crisis. But there’s still plenty of volatility in the regional banking market — which began with the collapse of SVB in March.
The latest on the apparent chopping block? PacWest. The LA-based midsize lender saw its shares plummet by more than 50% Thursday before news broke that it was selling a $2.7 billion loan portfolio.
PacWest’s liquidity has benefited from federal programs set up to protect troubled banks after the demise of SVB and Signature Bank. But like SVB, it also has large numbers of unsecured depositors and a high concentration of tech companies on its balance sheet. PacWest might just be one bank run away from collapse.
The downturn of midsize regional banks will hurt commercial lending to small businesses. Seizing and selling small banks could create a credit crunch, especially in lower-income US regions. With rapidly rising interest rates creating perilous conditions for banks, looming panic in the real estate sector, and fears of a recession on the rise, further instability seems more likely than not.
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