economy and politics

First Republic Bank bailout: US banks inject $30 billion

First modification:

Big US banks pumped $30 billion into First Republic Bank, stepping in to bail out the lender, which is experiencing a liquidity crisis following the collapse of two other US banks last week.

The largest banks in the United States will finance First Republic Bank with 30,000 million dollars in cash to stop its bankruptcy, and prevent contagion from reaching other regional banks amid turbulence in the country’s financial system.

JPMorgan, Bank of America, Citigroup and Wells Fargo — the four largest in the US by assets — deposited $5 billion each. Goldman Sachs and Morgan Stanley respectively deposited $2.5 billion. While US Bancorp, Truist, PNC, State Street and Bank of New York Mellon deposited $1 billion each.

Since the Silicon Valley Bank failure last week, global bank stocks have been hit with bond-related losses, which accumulated when interest rates rose last year.

Within days, fears reached Switzerland’s second-largest bank, Credit Suisse, forcing it to borrow up to $54 billion from the country’s central bank to bolster its liquidity.

In the past week, banks have borrowed a total of 4.8 billion from two Federal Reserve support facilities, a sign of mounting funding tensions following the failure of Silicon Valley Bank.
In the past week, banks have borrowed a total of $164.8 billion from two Federal Reserve support facilities, a sign of mounting funding tensions following the failure of Silicon Valley Bank. © France 24

But attention turned to the United States on Thursday, where big banks lined up in unprecedented support for First Republic, a regional lender whose shares have plunged 70% in the past nine trading sessions.

“The actions of the largest US banks reflect their confidence in the country’s banking system,” the banks said in a joint statement. “Together, we are deploying our financial strength and liquidity in the broader system, where it is needed most.”

There were reactions from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen saying that “this show of support from a group of large banks is very welcome, and shows the resilience of the banking system.”

An initial injection of $70 billion in funding from JPMorgan and the Federal Reserve was attempted on Sunday, but this did not calm investors.

First Republic has the third highest uninsured deposit rate among US banks, behind only Silicon Valley Bank and Signature Bank, according to a note by Raymond James.

First Republic was downgraded to “junk” on Wednesday by both Fitch Ratings and S&P Global.

with Reuters

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