According to an insider, U.S. officials at both the federal and state levels are assessing the potential of “market manipulation” as a factor behind significant fluctuations in banking share prices in recent days.

The move comes as regional bank shares continued their decline following the collapse of First Republic Bank, the third mid-sized U.S. lender to fail in the past two months, the New York Post reported.

As per Ortex, an analytics firm, short sellers garnered $378.9 million in paper profits on Thursday alone by betting against particular regional banks.

Despite the sector’s strong fundamentals and adequate capital levels, federal and state officials and regulators have grown increasingly wary of increased short-selling activity and share volatility in recent days, the source explained.

The insider, who was not authorized to speak publicly, further stated that “state and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities.”

Shares of PacWest Bancorp and other regional lenders plummeted after the Los Angeles-based bank declared that it was in discussions about strategic options.

PacWest Bancorp’s shares, in particular, fell by 57% on Thursday.

Written by staff