In a new filing with the US Securities and Exchange Commission (SEC) on Thursday, PacWest Bancorp revealed large new cash outflows in recent days from the bank it owns, Pacific Western Bank, but reaffirmed its ability to fund those withdrawals with available liquidity.
The fear is palatable as First Republic, Silicon Valley Bank, and Signature Bank have all collapsed amid bank runs in the last few months, and even large banks like Switzerland’s Credit Suisse have required significant stabilization measures at the state level.
JPMorgan CEO Jamie Dimon told US media on Thursday he thinks regional banks are “quite strong” but added “I think we have to assume there’ll be a little bit more” to the crisis.
News of PacWest’s losses only triggered further losses, with PacWest’s stock value collapsing another 23% on Thursday.
PacWest also revealed to the SEC on Thursday that its total deposits had declined by 16.9% in the first quarter of 2023.
“While the deposit news is not what the company wants to report, if the outflows are truly from the venture depositors and not the core bank, that is better news, despite the higher total outflow disclosure. The financial result is that the company is borrowing more to replace those deposits,” RBC Capital Markets analyst Jon Arfstrom said in a note to clients and reported in the media.
In response to the news, PacWest announced it had pledged another $5.1 billion the day prior at the Federal Reserve’s discount window, giving it an additional borrowing capacity of $3.9 billion and a total of $15 billion in immediately available liquidity. By contrast, the Beverly Hills-based bank has just $5.2 billion in uninsured deposits.
The collapse of several banks and uncertainty in the stability of others has led to increased questioning of the long-term stability of financial markets as a whole, with US media reports on Thursday pondering if another 2008-like crash was already in motion. That financial catastrophe resulted in the largest market losses since 1929 and triggered the Great Recession, a period of near-global economic malaise, and concurrent social unrest.