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US Regional Banks Collapse Despite Fed’s Claims of Soundness – Is the Banking System Failing?

In the Brief:

  • US regional banks PacWest, Western Alliance, and Metropolitan Bank experience share price drops in after-hours trading
  • PacWest Bancorp falls 52.5% after exploring strategic options
  • Crypto-friendly Western Alliance and Metropolitan Bank also affected
  • Fed Chairman Powell reassures public about banking sector, but mocked on Crypto Twitter
  • PacWest Bancorp market cap expected to lose $340m

3 - 4 minute read

The share prices of several US regional banks experienced a significant downturn in after-hours trading on Wednesday, despite Federal Reserve Chairman Jerome Powell providing assurances that the banking sector was “sound” and “resilient.” PacWest Bancorp was among the worst affected, with its share price plummeting by over 50% after Bloomberg reported that the bank was considering strategic options including a possible sale. This news added to concerns about a wider banking crisis in the US, which has been a topic of discussion among crypto enthusiasts in recent weeks.

The share price of PacWest fell over 50% after hours on Wednesday. Source: Google Finance

While Powell attempted to calm concerns about the banking sector, he also announced that the Federal Reserve would increase interest rates by 25 basis points. Powell stated that the banking sector had improved since early March and that the Federal Reserve was committed to preventing similar events from occurring in the future. However, this statement was met with skepticism by some members of the crypto community, who pointed out that PacWest was the fifth bank to collapse in recent weeks, following the failures of SVB, Silvergate, Signature, and First Republic.

It is worth noting that some of the worst-affected banks in the recent downturn, including Metropolitan Bank and Western Alliance Bancorp, have shown an interest in blockchain and digital asset solutions. Metropolitan Bank previously offered services to crypto firms before closing its digital asset vertical in January due to concerns about how the industry was developing. Western Alliance Bancorp integrated blockchain-based payment solutions for its client base from its blockchain and digital asset branch.

The Bottom Line

The recent downturn in US regional bank stocks may present both opportunities and risks. While some banks may be struggling, others may be well-positioned to benefit from the growing interest in blockchain and digital assets. Traders should approach this market with caution and carefully consider the potential risks before making any investment decisions.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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