According to multiple news reports, First Republic Bank is nearing an agreement with some of the largest US banks to stabilize its balance sheet after the failure of Silicon Valley Bank.
The San Francisco-based bank is nearing a deal to take deposits of up to $30 billion from Bank of America, JP Morgan, Wells Fargo, Citigroup, Morgan Stanley and other lenders. Bloomberg News reported Thursday.
The proposed interbank bailout, which reportedly has U.S. government approval, comes at a time when First Republic Bank faces threats of exodus from investors and depositors. increase.
First Republic’s share price fell 66% last week amid concerns that banks may not have enough cash to handle massive withdrawals.
First Republic, like Silicon Valley Bank, has used most of its deposits in long-term investments that have lost value due to interest rate hikes by the Federal Reserve. About 68% of the bank’s deposits are uninsured, according to S&P Global, more than many of its competitors but lower than Silicon Valley Bank’s 94%.
Credit rating agency Moody’s this week considered a downgrade of First Republic, noting that a high proportion of uninsured deposits could prompt depositors to move funds elsewhere quickly.
“If a bank faces higher-than-expected deposit outflows and its liquidity backstop proves to be inadequate, it may be required to sell its assets, resulting in unrealized losses crystallizing in that bank. There is a nature. [securities],” Moody’s analyst wrote.
Bloomberg reported that the largest financial institutions could each contribute $5 billion to the First Republic.
As the US banking system faces an apparent crisis of confidence, efforts are being made to save another bank from bankruptcy.
Federal regulators on Sunday insured all deposits at failed Silicon Valley and Signature banks in a bid to restore public confidence and prevent further bank crackdowns.
Treasury Secretary Janet Yellen told the Senate Finance Committee on Thursday, “Actions this week demonstrate our firm commitment to ensuring our financial system is strong and our depositors’ savings are safe. .
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