US officials are looking into possible market manipulation of regional bank stocks
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- US and state officials are assessing whether market manipulation is driving volatility in regional bank stocks, Reuters reported.
- The sharp moves are drawing attention as the industry is seeing solid fundamentals such as stable deposits.
- A banking association is asking the SEC to stop short-bets on bank stocks.
Federal and state officials are assessing whether market manipulation has been driving wild swings in regional bank stocks, Reuters reported.
A jump in volatility and short-selling activity in shares of small to mid-sized banks is drawing the attention of officials and regulators as there are solid fundamentals like stable deposits and sufficient capital levels in the sector, an unnamed source told Reuters in a report published Thursday.
"State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities," the source was quoted as saying.
The Securities and Exchange Commission calls market manipulation "intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities."
PacWest, Western Alliance and shares of other small to mid-sized banks have plunged recently, with that group under scrutiny after the March collapse and seizures of Silicon Valley Bank and Signature Bank.
PacWest this week said it "has not experienced out-of-the-ordinary deposit flows" after the seizure of troubled First Republic Bank and other industry news.
The California Department of Financial Protection and Innovation told Reuters it could not confirm investigations or whether it was aware of any particular market activity. But the department said it was focused on stopping and remedying any practices that violate state law.
The American Bankers Association is urging the SEC to stop short bets in regional bank stocks. Short sellers pulled in nearly $400 million on Thursday from the sell-off in regional bank stocks, according to data from financial analytics platform Ortex.