NEW YORK (AFP) – America’s largest banks moved on Thursday to shore up First Republic, easing fears that the regional lender could be the next domino to fall after collapses including Silicon Valley Bank (SVB).
A consortium of 11 United States (US) private banks, including Bank of America, Citigroup and JPMorgan Chase, announced they would deposit USD30 billion into First Republic. The move marks a dramatic initiative by the lenders to bolster the system following failures of three midsized lenders in the last week. “This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes,” the group said in a joint statement.
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said.
Shares of First Republic reversed earlier losses to close 10 per cent higher on Wall Street on Thursday. “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said leaders of the Treasury Department, US Federal Reserve (Fed) Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency in a joint statement.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo each are making a USD5 billion uninsured deposit in First Republic, while Goldman and Morgan Stanley will put in USD2.5 billion each.
A group of five other lenders, including PNC Bank and US Bank, are each allotting USD1 billion.
In a statement, First Republic founder Jim Herbert and Chief Executive Officer Mike Roffler said the “collective support strengthens our liquidity position… and is a vote of confidence for First Republic and the entire US banking system”.
The action comes on the heels of emergency measures taken late last Sunday by the Fed and other US regulators to assure all depositors of two failed banks, SVB and Signature Bank.
On Thursday, the Fed said it has lent US banks close to USD12 billion under a new one-year lending programme unveiled last Sunday as authorities moved to ease stress on the financial system. The total outstanding amount of all advances under the Bank Term Funding Programme reached USD11.9 billion by Wednesday, the central bank said.
