Shares of PacWest Bancorp (NASDAQ: PACW) plummets over 24% pre-session on Thursday as the bank pledged additional assets as collateral to increase its borrowing capacity under the discount window of the United States Federal Reserve and stated that it had $15 billion in immediately available liquidity.
On Wednesday, the lender pledged an additional $5.1 billion in loans to the central bank, giving PacWest an additional borrowing capacity of $3.9 billion.
The bank said in a filing that they pledged additional assets as collateral for borrowings to increase their liquidity position for potential deposit outflows.
The $15 billion liquidity is more than enough to cover the $5.2 billion of uninsured deposits at the Los Angeles, California-based bank, it said.
During the week ended May 5, deposits declined about 9.5%, the bank said, adding the majority of those outflows happened on May 4 and May 5 after news reports said PacWest was exploring options.
Worries over the soundness of mid-sized banks have grown in recent days, with investors punishing even seemingly robust institutions’ equities, despite authorities’ assurances that the banking sector is financially sound.
Other lenders’ shares declined in premarket activity, including Western Alliance Bancorp, KeyCorp, and Zions Bancorp.
PacWest shares have fallen nearly 40% this month. The bank’s shares dropped to a historic low last week after it revealed it was contemplating strategic asset sales.
The bank said it aims to conclude the asset sales in the second quarter of 2023.
PacWest had $341.7 million in cash and cash equivalents at the end of the first quarter, which it stated would be enough to cover cash flow demands for the following 12 months.
Wall Street executives and bank analysts have pushed authorities to give additional security for bank depositors and examine alternative backstops, claiming that only a robust intervention can bring the crisis to an end.
