Pressure is growing on U.S. regulators to take more steps to shore up the country's banking sector as a renewed rout in regional lenders' shares forced PacWest Bancorp to explore options to bolster its balance sheet.
, citing uncertainty over when the deal would be approved by regulators, triggering a near 40% fall in the U.S. bank's shares.Activist investor Nelson Peltz told the Financial Times that deposit insurance should be extended, echoing billionaire investor Bill Ackman who on Wednesday tweeted that regulators' failure to expand the insurance regime "hammered more nails in the coffin.
Some regulatory experts, including former FDIC chair Jelena McWilliams, warned that increasing deposit insurance could encourage risk-taking, while others noted regulators have fewer tools to support banks following the 2008 financial crisis. The U.S. Treasury Department on Thursday said it was continuing to "closely monitor" market developments, but "the banking system hasand deposit flows are stable." The Federal Deposit Insurance Corp. did not respond to a request for comment.
The rout had also thrown the practice of short-selling, in which investors profit by betting against shares, back into the spotlight, with prominent law firm Wachtell, Lipton, Rosen & Katz calling on Thursday for securities regulators to restrictWhile the U.S. Securities and Exchange Commission is not contemplating such a ban, Reuters reported Wednesday, its chair Gary Gensler said on Thursday the agency is focused on identifying any form of market misconduct.
To stem the contagion, regulators took emergency steps to reimburse all customers at the two banks, while the Fed offered lenders additional liquidity.
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