PacWest Bancorp was knocked 25% lower when the US trading session opened on Thursday following news of a significant decline in deposits hitting the regional bank last week.
During the week ending on May 5, PacWest reported a decline of approximately 9.5% in deposits, with the majority of the outflows occurring on May 4 and May 5 following news reports speculating about the bank's future plans.
Investors were rattled despite PacWest's assurance that had sufficient liquidity to cover the bank’s US$5.2bn of uninsured deposits.
In response, the bank has decided to pledge an additional US$5.1bn as collateral to the US Federal Reserve, aiming to enhance its borrowing capacity.
"We pledged additional assets as collateral for borrowings to increase our liquidity position for potential deposit outflows," stated PacWest in a filing.
Shares in PacWest recovered as the day progressed, but still remain around 15% lower against the day.
Year to date, PacWest is nearly 80% lower after being battered following the collapse of Silicon Valley Bank in March.