PacWest Bancorp Loses Deposits After First Republic Bank Closure

PacWest Bancorp Loses Deposits After First Republic Bank Closure

PacWest Bancorp, a California-based lender, experienced a 20% drop in its stock prices after reporting a significant loss of its deposits. The company stated in its quarterly report that its deposits decreased by 9.5% last week, mainly on May 4 and 5, due to heightened market and customer fears following the closure of First Republic Bank by regulators on May 1. The bank clarified that it has funded its deposit loss with immediate liquidity of $15 billion and pledged $5.1 billion to the Federal Reserve’s discount window, giving PacWest another $3.9 billion in additional borrowing capacity.

PacWest was not the only bank to suffer from the banking sector fear that resulted from First Republic’s closure. The bank lost 47% of its stock prices after Silicon Valley Bank depositors were bailed out in March, and it lost deposits that exceeded federal deposit insurance coverage. The bank’s deposits fell by $5.7 billion in the first quarter of 2023. Western Alliance, another Phoenix-based bank, also experienced significant volatility after March’s bank failures, but it reported a $600 million increase in deposits between May 2 and May 9.

US Senator John Kennedy criticized banks for being “sophisticated Ponzi schemes” due to their reliance on their depositors’ trust in them. BitMEX co-founder Arthur Hayes also predicted that PacWest would be the next bank to fall in the ongoing banking crisis after the bank’s sliding stock prices. PacWest has clarified that it has sufficient liquidity to cover its deposit loss, but the ongoing news coverage of these events has increased certain risks and uncertainties related to the bank’s business and future prospects.


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