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Banking crisis: JPMorgan predicts the US will ban short selling

Banking crisis: JPMorgan predicts the US will ban short selling

In the framework of a difficult week, regulatory agencies of the United Statess feel pressure to take actions that restore confidence in banks. This is why analysts like the JPMorgan they think they will take emergency measures.

Specifically, the financial giant, which has just acquired First Republic Bank, anticipated that Washington considers implementing an emergency ban on “short” sales. The Times reported this Saturday that JPMorgan analysts anticipate a brake on this mechanism.

Also, suggestions circulated to expand the insurance deposits, as a preventative measure against bank runs. Even in a more dramatic situation, regulators could explore limitations to the circulation of certain information on social networks.

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The American regional bank pac westone of the entities most affected by banking turmoil of the last months in that country, it cut dividends to its investors by 25 cents on the dollar per share at just one cent. After the heavy losses in its price this week, the entity decided to reduce dividends due to the volatility of the sector. Nevertheless, The Californian bank stressed in a statement that its business is “fundamentally safe.”

“Given the current uncertainty in the economy, the recent volatility in the banking sector and potential changes in capital requirements by regulatory authoritieswe believe that the dividend reduction is a prudent step to accelerate our plans to raise capital,” said PacWest CEO, paul taylor, according to the Bloomberg agency.

Following the trend of other regional bankss, the PacWest stock closed yesterday with a rebound of 81.7% on Wall Street, recovering practically everything lost this week. Previously, last Wednesday, its price collapsed after it was reported that the company was analyzing “strategic options” including the possibility of a sale. Despite the recovery, its share -with a value of US$5.76- is still far from the US$26.68 that was quoted in March, before the collapse of Silicon Valley Bank (SVB).

The fear in the markets is that regional banks remain exposed to heavy losses potential for the interest rate hike in United States.

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One of the causes that caused the fall of the SVB and other banks was that of invest in long-term treasury bonds whose value was devalued with the rise in Fed rates. The same applies to loans and mortgages granted before the rate hike, whose setting speed took you by surprise to banking entities. The fear that these banks did not have sufficient support for deposits generated a series of bullfights in March, which, however, have stabilized in recent weeks.

Among analysts, It is considered that the market “overreacted” this week with the banksand that the losses in their prices do not coincide with the current liquidity situation.

In fact, PacWest itself clarified this week that “it did not register any leakage of deposits outside the original after the sale of First Republic Bank, this week”, and that their insured deposits –that is, they have State support as they are less than US$250,000- exceed 75%. What if the market awaits are the reactions that the regulatory authorities will have In the next weeks.

According to various reports, the Federal Deposit Insurance Corporation (FDIC), federal regulatory body in charge of guaranteeing bank deposits, will publish next week a proposal to redo the backgrounds, having largely emptied them to bail out customer deposits of SVB and Signature Bank.

In order to avoid a deepening of the tensions of small and medium banks and give them relief, FDIC would exempt banks with less than $10 billion in assets from cost that will make the entities pay to rebuild the well.

Source: Ambito

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