Wall Street Giants to Rescue First Republic Bank

to prevent Infection. 11 major US banks voted Thursday to bail out the troubled institution, preventing it from becoming the next domino to fall after three consecutive bankruptcies. of Silicon Valley Bank.

They have pledged to deposit a total of $30 billion in the First Republic. This, according to them, is a sign of the country’s “confidence in the banking system”, a joint press release said.

The move was welcomed by US officials, the Economy Ministry, the Central Bank (Fed) and two financial regulators, saying in a separate press release that it “demonstrates the resilience” of the banking system. The firms have been struggling since the weekend to reassure markets and individuals about the state of the banks.

12 billion dollars were lent by the central bank

The central bank said Thursday it had lent nearly $12 billion to U.S. banks since Sunday so they have the funds they need to honor withdrawal requests from their customers.

First Republic, the 14th largest U.S. bank by assets, was on the hot seat days later. Silicon Valley Bank’s Close FailuresSignature Bank and Silvergate, which primarily serve affluent clients.

Investors and analysts feared that many customers would prefer to move their money to companies that did not pose a risk of bankruptcy. A poor prospect for confidence in the banking system as a whole. So the big banks have decided to work together.

“The banking system has strong credit, abundant liquidity, large capital and high profitability. Recent events have not changed this position,” they said in their joint statement.

“Vote of Confidence”

First Republic’s day started badly on Thursday: after already losing 73% in a week, the action lost as much as 36% after a Bloomberg agency article that the bank was exploring “strategic options” for its future. Potential sales.

However, the shares recovered as rumors of a possible joint venture by the big banks surfaced. It ended up being 12%.

Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, the nation’s four largest banks by asset size, are expected to contribute $5 billion each.

Investment banks Goldman Sachs and Morgan Stanley will pay $2.5 billion each, while BNY Mellon, PNC Bank, State Street, Truist and US Bank will pay $1 billion.

The bank’s leaders, in their own press release, thanked their colleagues. “Their collective support strengthens our liquidity position, reflects the quality of our business, and is a vote of confidence in First Republic and the entire American banking system,” wrote Jim Herbert, founder and chairman of the board of directors. Roffler, General Manager.

Executives say the total volume of daily withdrawals has “declined significantly”. “The bank is now focusing on reducing borrowing and assessing the composition and size of its balance sheet,” they added.

Tremendous growth

Founded in 1985 and headquartered in San Francisco, First Republic provides individual and corporate private banking and wealth management services primarily in California and the East Coast. It has grown rapidly in recent years, rising from $22 billion in assets at the end of 2010 to $212 billion at the end of 2022.

The bank, which has already been closely watched for days, said on Sunday it had “strengthened and diversified its liquidity” and noted that it has $70 billion in facilities provided by the U.S. Federal Reserve and JPMorgan Chase.

Not good enough in the view of rating agencies S&P Global Ratings and Fitch, which on Wednesday downgraded the company’s credit rating in the speculative investments category.

20 minutes with AFP