WASHINGTON, May 4 (Reuters) - The U.S. Treasury Department on Thursday said it was continuing to monitor market developments amid sharp drops in the shares of regional lenders PacWest Bancorp <PACW.O and Western Alliance Bancorp (WAL.N), but deposit flows were stable.
"We continue to closely monitor market developments," a Treasury official said. "The banking system has substantial liquidity and deposit flows are stable."
Shares of Los Angeles-based PacWest were down 60% after the lender confirmed it was exploring strategic options. Western Alliance's stock was down 58.2%, despite a statement from the bank saying it had no unusual deposit outflows and had adequate liquidity.
Experts say the share price moves do not reflect the banks' fundamentals and are likely a result of short-selling activity following the collapse of First Republic Bank and its sale to JPMorgan Chase & CO (JPM.N) on Monday.
First Republic was the third major casualty of the biggest crisis to hit the U.S. banking sector since 2008.
