Regional bank stocks including First Republic Bank (FRC), Western Alliance Bancorp (WAL), Zions Bancorp (ZION), Comerica (CMA), and PacWest Bancorp. (PACW) were on a strong rebound in morning trading on Tuesday after a string of losses over the past six trading sessions following the collapse of SVB and Signature Bank.
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Investors seemed to be reassured after the Fed stepped in and President Biden stated that the banking system was safe. The sell-off in regional banking stocks came as customers of regional banks moved to shift their deposits to bigger banks as they perceived these bigger banks to be safer for depositors.
However, bank regulators stepped in with some extraordinary measures to avert a crisis. These measures included introducing a new backstop for banks to protect the deposits of all banking clients in the U.S. The Fed also introduced a new “Bank Term Funding Program” under which $25 billion would be available. As a part of this program, the Fed would offer one-year loans to banks under more flexible terms than it typically provides.
The rout in regional bank stocks also led to the SPDR S&P Regional Banking ETF (KRE) sliding by more than 13% in the past five days alone. However, it was up by more than 8% in morning trading on Tuesday.