March 17, 2023 (MLN): In a move to shore up regional lender First Republic, a consortium of 11 US private banks, including Bank of America, Citigroup, and JPMorgan Chase will deposit $30 billion into the bank.
The move comes after the collapse of three midsized lenders in the last week, including Silicon Valley Bank. The group of banks said in a joint statement that their action reflects their confidence in the First Republic and the banking system as a whole.
The announcement led to a 10% increase in First Republic's shares on Wall Street. The banks involved include Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley, who will each make uninsured deposits of $5bn and $2.5bn, respectively. A group of five other lenders, including PNC Bank and US Bank, will each allot $1bn.
The move follows emergency measures taken by the Federal Reserve and other US regulators late Sunday to assure all depositors of two failed banks, Silicon Valley Bank and Signature Bank.
The crisis has sparked concerns about a contagion effect, with especially keen worries that more banks could suffer a run by depositors. The crisis has also spread to Europe, with the Swiss central bank intervening to support Credit Suisse after it came under pressure.
Founded in 1985, First Republic is the 14th largest US bank by assets, with $212bn at the end of 2022. The bank is known for private banking and wealth management and has a large percentage of uninsured deposits, which has kept it under scrutiny after the failures of SVB and Signature.
According to S&P Global Ratings, 68% of the bank's accounts hold deposits of more than $250,000, the level automatically guaranteed by US regulators.
Despite federal banking regulators' actions and the bank actively increasing its borrowing availability, S&P said that the risk of deposit outflows is elevated at First Republic Bank.
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Posted on: 2023-03-17T10:22:53+05:00