The rescue of First Republic this week has failed to arrest a sell-off in regional bank shares, which plunged on Tuesday as investors digested JPMorgan’s takeover of the troubled Californian lender.
Trading in PacWest, seen as one of the weakest of the midsized regional banks, was briefly halted for volatility and closed down 27.8 per cent. The fall marked PacWest’s worst daily decline since March 10, when Silicon Valley Bank’s collapse heaped pressure on the entire sector. Western Alliance fell 15.1 per cent.
Both banks have drawn scrutiny because of their similarities to SVB and First Republic, which were taken over by the Federal Deposit Insurance Corporation after they suffered huge deposit outflows and large paper losses on long-dated assets.