Regional banks are seeing flight of deposits to too-big-to-fail megabanks

The unexpected demise of Signature Bank over the weekend, on the heels of the failure of Silicon Valley Bank, ignited a shoot-first-and-ask-questions-later reaction among regional-bank investors as customers moved deposits to the largest U.S. banks for perceived safekeeping, observers said Monday.

Shares of regional banks such as First Republic Bank FRC, Western Alliance Bancorp WAL, PacWest Bancorp PACW and Zions Bancorp ZION dropped Monday, even after U.S. bank regulators set up a new emergency loan program as a backstop…