Shares of regional banks including First Republic (NYSE: FRC), PacWest Bancorp (NASDAQ: PACW), and Western Alliance Bancorp (WAL) were up in pre-market trading on Thursday after investors seemed to digest Federal Reserve Chairman Jerome Powell and treasury secretary Janet Yellen’s comments regarding bank deposits.
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Both of them addressed the issue of the safety of deposits as the U.S. regional banking system has gone through an upheaval. In an attempt to reassure the public, Powell said “depositors should assume that their deposits are safe,” at a press conference following the Fed raising interest rates by 25 basis points. He added that the Fed had different tools to protect deposits where there was an indication of serious harm to the economy.
However, Yellen, before the Senate Appropriations Committee, responded to a question about whether the Treasury would insure all deposits without the approval of Congress and stated, “I have not considered or discussed anything having to do with blanket insurance or guarantees of all deposits.”
This comment set bank stocks on edge and fuelled a decline in regional bank shares on Wednesday.
Over the past three months, the iShares U.S. Regional Banks ETF (IAT) has gone down by more than 25%.
