The next US bank is about to expire

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Along with Pacific Western Bank, the next US regional bank has floundered: After First Republic Bank expires this week, the next domino in the US banking industry may be tipped.

According to insiders, the embattled Pacific Western Bank is considering a possible sale, Reuters news agency wrote. The bank recently tried to regain investor confidence with a liquidity injection, but without success. The share price has dropped almost 90 percent since the start of the US bank earthquake on March 8. Only on Wednesday, the exchange rate fell by 43.16 percent compared to the previous day.

The fifth U.S. bank currently to be knocked down

Pacific Western Bank and the US’s fifth regional bank are in danger of collapse. The reason is the same for all: the risks of clustering on the balance sheet and the liberalization of US regional banks enforced by former US President Donald Trump (76). With this move, Trump has made US regional banks particularly vulnerable to turbulent times.

Banks can therefore delay value adjustments on their bonds. This is exactly what happened with the US Federal Reserve’s rate hikes. Current bonds yield lower interest rates and therefore lose value significantly.

Pacific Western Bank’s problems are reminiscent of the First Republic Bank case. The share price has dropped 97 percent since the start of the year. Customers had completely lost their confidence in the first three months of the year and had withdrawn their deposits of $72 billion. The bank could no longer be salvaged. US bank JP Morgan finally announced this week that it will take over the First Republic. Also, so that the domino doesn’t topple other US regional banks.

Will the banking domino continue?

But the example of the Pacific West Bank shows that the crisis is not over yet. This coincides with the assessment of Sergio Rossi (55). “It would be nice if the crisis was over now,” said a professor of macroeconomics and monetary policy at the University of Freiburg earlier in the week. “But there will be more of a domino effect.”

But these are by no means limited to US regional banks. Rossi, among other things, sees Deutsche Bank in the swirl. “The uncertainty is so great that even a false rumor could cause a bank to crash.”

The Pacific West Bank, with total assets of $44 billion, is a small rock that the system can handle well. The difficulties faced by a large institution like Deutsche Bank, whose balance sheet is 1337 billion euros, will have serious consequences for the global financial system. This has already been demonstrated by the global tension between officials surrounding the urgent takeover of Credit Suisse by UBS. (smt)

Source :Blick