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Treasury: US banks have 'substantial' liquidity, deposit flows are stable

Published 05/04/2023, 11:50 AM
Updated 05/04/2023, 11:57 AM
© Reuters. FILE PHOTO: The United States Department of the Treasury is seen in Washington, D.C., U.S., August 30, 2020. REUTERS/Andrew Kelly/File Photo

WASHINGTON (Reuters) - The U.S. Treasury Department on Thursday said it was continuing to monitor market developments amid sharp drops in the shares of regional lenders PacWest Bancorp WAL) Bancorp, but deposit flows were stable.

"We continue to closely monitor market developments," a Treasury official said. "The banking system has substantial liquidity and deposit flows are stable."

Shares of Los Angeles-based PacWest were down 60% after the lender confirmed it was exploring strategic options. Western Alliance's stock was down 58.2%, despite a statement from the bank saying it had no unusual deposit outflows and had adequate liquidity.

Experts say the share price moves do not reflect the banks' fundamentals and are likely a result of short-selling activity following the collapse of First Republic Bank (OTC:FRCB) and its sale to JPMorgan Chase (NYSE:JPM) & CO on Monday.

First Republic was the third major casualty of the biggest crisis to hit the U.S. banking sector since 2008.

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