On Friday, May 5th, the shares of multiple US regional banks experienced a dramatic rally on the stock markets after significantly falling throughout the week. PacWest led the rally and saw its shares close more than 81.70% higher at $5.76, up from its opening price on Monday. While the positive turn on Friday was promising, the bank is still down 43% compared to when it opened trading on Monday. Western Alliance and First Horizon Bank also experienced a dramatic surge and fell respectively 49.31% and 8.75% below their Monday opening prices.

The volatility experienced by US regional banks this past week began when the Federal Deposit Insurance Corporation (FDIC) seized and sold First Republic in receivership on Monday, May 2nd. The collapse reignited the banking crisis that had been relatively dormant for around a month. The crisis originated in the first half of March, when three banks—Silevrage, Silicon Valley, and Signature—were liquidated or shut down. Subsequent emergency measures from the Government didn’t restore the confidence of the stock markets and prompted the sale of First Republic.

Therefore, the recent rally of the American regional banks shares on Friday comes as a surprise, as it happened despite being preceded by the failed merge of First Horizon Bank and the Toronto-Dominion Bank as well as the recurrent drop of the spreads in the discount window to its highest levels since 2008. Although the rally was short lived, it is a sign that the banking crisis is gradually calming down, restoring the confidence of the stock markets in the banks.



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