US banks blame 'abusive trading practices' for crisis of confidence

US banks blame 'abusive trading practices' for crisis of confidence

The main lobby group for US banks has appealed for regulators’ help to close the door on the crisis of confidence ripping through shares in a growing number of the country’s lenders.

The American Bankers Association (ABA) used a letter to the Securities and Exchange Commission (SEC) to accuse so-called short sellers of bringing otherwise healthy banks to their knees through “abusive” practices.

There has been an assault on the share prices of many regional lenders this week, exacerbating pain inflicted on the sector in the wake of the failures of Silicon Valley Bank, Signature Bank and First Republic.

There have been significant deposit flights in the wake of investor concern about balance sheet pressure caused by rising interest rates.

The Federal Reserve’s battle to control inflation has hit the value of bank bond holdings.

Just this week, LA-based PacWest and Western Alliance of Arizona have seen their share prices clobbered.

In PacWest’s case, it was forced to release a statement saying it was exploring its strategic options while Western Alliance denied a Financial Times report that it was seeking a sale.

It did not stop a further 51% being taken off its market value on Thursday.

Western Alliance lost 31%.

Early dealing on Friday suggested some breathing space for the lenders despite data showing higher employment and wage growth for the US economy than analysts had expected.

Such news only fuels rate hike pressure at the Fed.

The ABA’s claim that some investors were deliberately fuelling the crisis of confidence was supported by figures from analytics firm Ortex.