First Republic Provides Lifeline Manila Times
On Thursday, AMERICA’s biggest banks moved to support the First Republic, easing fears that the regional lender could be the next domino to fall after the collapse, including the Silicon Valley bank.
A consortium of 11 U.S. private banks, including Bank of America, Citigroup and JPMorgan Chase, has announced it will invest $30 billion in First Republic.
The move marks a dramatic initiative by lenders to strengthen the system following the failure of three medium-sized lenders last week.
“These actions by America’s largest banks reflect their confidence in the First Republic and banks of all sizes,” the group said in a joint statement.
“Together we are channeling our financial strength and liquidity into the larger system where it is needed most,” the banks said.
First Republic shares cut back on earlier losses and traded higher on Wall Street on Thursday after reports it could receive an infusion of funds from some of the country’s most prominent financial institutions.
“This show of support from a group of large banks is welcome and demonstrates the resilience of the banking system,” said the heads of the Treasury Department, the US Federal Reserve, and the Federal Deposit Insurance Corporation. and the Office of the Comptroller of the Currency in a joint statement.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are each putting up an uninsured deposit of $5 billion in the First Republic, while Goldman and Morgan Stanley will put in $2.5 billion each.
A group of five other lenders, including PNC Bank and US Bank, are providing $1 billion each.
In a statement, First Republic founder Jim Herbert and CEO Mike Roffler said “the collective support strengthens our liquidity position…and is a vote of confidence for the First Republic and the entire US banking system.”
The action comes on the heels of emergency measures taken Sunday night by the Federal Reserve and other US regulators to reassure all depositors of two bankrupt banks, Silicon Valley Bank (SBV) and Signature Bank.
The collapse of the SVB last Friday raised fears of a contagion effect, especially acute fears that more banks could be hit by a run on depositors.
The crisis also spread to Europe when the Swiss central bank stepped in to support Credit Suisse after it came under pressure.
Founded in 1985, First Republic is the 14th largest US bank by assets with $212 billion at the end of 2022.
The San Francisco-headquartered lender also has a presence on the East Coast, including New York and Florida, as well as western states such as Washington and Wyoming.
The bank is known for private banking and wealth management. Due to his clientele, he has a high percentage of uninsured deposits, which keeps him under scrutiny after the failures of SVB and Signature.
Crypto banking giant Silvergate also shut down last week in the face of market turmoil and regulatory pressure.
While First Republic’s clients come from a wide variety of sectors, there were fears that many might try to flee to the relative safety of large, well-capitalized Wall Street banks in light of the ongoing financial market turmoil.
According to S&P Global Ratings, 68 percent of bank accounts contain deposits of more than $250,000, which is automatically guaranteed by US regulators.
“We believe that the risk of deposit outflows at First Republic Bank is elevated,” S&P said on Wednesday as it moved to downgrade the lender’s rating.