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A12 BUSINESS
Friday 5 May 2023

The banking crisis isn’t over. But how

bad will it get?

By KEN SWEET and MI-
CHELLE CHAPMAN
AP Business Writer
NEW YORK (AP) — Uncer-
tainty continues to pum-
mel the banking industry,
despite assurances from
financial regulators and
bankers such as Jamie Di-
mon this week that the
worst of the recent crisis is
over and the health of the
banking system remains
strong.
Bank shares have sold off
on Wall Street this week fol- Customers read an announcement in the window of a First
lowing the government sei- Republic Bank branch by their headquarters in San Francisco,
zure and subsequent sale Monday, May 1, 2023.
of First Republic Bank to Associated Press
JPMorgan. It was the sec-
ond-largest bank failure in Yet markets do not appear The KBW index of regional
U.S. history and the third to have been reassured banks has fallen 13% so
failure of a midsize lender by prominent names in far this week. PacWest
in two months. finance who say instabil- was targeted because of
While many thought the ity in the banking sector a high concentration of
sale of First Republic “would ended with the takeover large, uninsured deposits
stop the ‘who’s next?’ con- Monday of First Republic from venture capital and
versations, investors are Bank, the third bank failure tech clients, the same
clearly continuing to focus in short order. JPMorgan’s type of customers who trig-
on remaining players that Dimon said Monday that gered bank runs at Silicon
are deemed the weakest” he believed “this part” of Valley and First Republic.
analysts at UBS wrote in a the banking crisis was over. But even Midwest region-
note to clients. Federal Reserve Chair Je- als such as Comerica and
The bigger worry is that the rome Powell vouched for KeyCorp are down more
bank failures might lead the health of the financial than 20% this week. That
to doubts about relatively system on Wednesday. could reflect concerns
healthy banks, creating a Regardless of those assur- about large amounts of
financial contagion that ances, a renewed sell-off real estate loans, particu-
could impact the wider Thursday focused on Pac- larly in the office property
economy. Averting that West Bancorp and West- market, which continues
scenario was the reason ern Alliance Bancorp, two to suffer the effects of the
the U.S. put tighter restric- smaller regional banks pandemic.
tions on major banks fol- whose shares have been PacWest, based in Los
lowing the financial crisis 15 under pressure since Sili- Angeles, and Western Al-
years ago. con Valley Bank failed in liance, in Phoenix, each
It is difficult to ignore the mid-March and set off the issued a statement over-
sense of unease in banking current crisis. PacWest fell night saying they weren’t
right now, though there’s 38% after acknowledging experiencing any out-of-
no need for concern if your it was considering putting the-ordinary deposit with-
money is in a bank insured itself up for sale. drawals following the sale
by the Federal Deposit In- But there was a significant of First Republic, a classic
surance Corp. and you sell-off in numerous re- bank run that was acceler-
have less than $250,000 gional banks, including Zi- ated by social media and
there, which covers most ons Bancorporation, Com- modern technology. Both
accounts. erica, Truist, KeyCorp and saw significant withdraw-
Huntington. als following the failure of
Silicon Valley Bank, but the
banks say deposits have
increased since March 31.
Western Alliance issued a
separate statement Thurs-
day morning denying a
story in The Financial Times
that said the bank is con-
sidering a sale. Its shares
were down 26% in after-
noon trading, but had tum-
bled 40% earlier.q