Banking Crisis 2023: Your Questions Answered

Three banks in the U.S. have failed so far during the 2023 banking crisis.
Anna Helhoski
By Anna Helhoski  
Updated
Edited by Rick VanderKnyff  

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Update as of May 4: There’s already trouble brewing for another bank: PacWest Bancorp, a midsize regional lender based in Los Angeles. On Wednesday, Bloomberg News first reported that PacWest Bancorp was in the midst of a selloff, mere hours after Federal Reserve Chair Jerome Powell said that the banking system is “sound and resilient.” Following reports of a selloff, the share price of PacWest Bancorp fell suddenly by more than 50%.

PacWest said, in a statement Thursday, that it was already planning to sell its $2.7 billion loan portfolio and is now evaluating potential partners and investors. The statement also said, “The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.”

An updated version of the original story below published March 31.

Recent banking failures in the U.S. and Europe have prompted government interventions in an effort to contain the crisis. The collapses have brought discussion about regulating the banking sector back into the spotlight in a way we haven’t seen since the Great Recession. The phrase “too big to fail” has made its way into the zeitgeist once again.  

On March 21, U.S. Treasury Secretary Janet Yellen said in a statement to the American Bankers Association, “The situation is stabilizing. And the U.S. banking system remains sound.”

» MORE: First Republic Bank fails, but deposit accounts stay accessible

Some economic wonks and lawmakers are now arguing for reform including an increase to the $250,000 Federal Deposit Insurance Corp. insurance cap. And midsize banks are asking the FDIC to insure all deposits for at least two years, according to reports. But House Republicans are calling for an end to banking bailouts and said they oppose “any universal guarantee on bank deposits over the current limit.” 

However, on March 22, Yellen told senators, “I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits.”

Meanwhile, the Federal Reserve isn’t backing down from its mission to tame inflation. The Fed opted to raise the federal funds rates by 25 basis points on May 3. It’s the 10th increase the Fed has called for since March 2022. Last year, the Fed raised interest rates by 75 basis points four times in a row. The latest hike brings the current rate level to 5.00%-5.25%.

To get you up to speed on the 2023 banking crisis, here are answers to popular questions about recent events.