Leaders of leading US financial institutions say the move is “welcome” amid fears the California-based lender is on the brink of collapse.
The largest banks in the United States have moved to support First Republic Bank in an effort to allay fears that the regional lender could be the next domino to fall after the second-biggest banking collapse in the history of the United States. USA.
Shares of the crippled California-based bank offset earlier losses to trade higher on Wall Street Thursday after reports it could receive an infusion of funds from some of the nation’s top financial institutions.
A group of 11 private U.S. banks, including Bank of America, Citigroup and JPMorgan Chase, have since announced that they would invest $30 billion in First Republic.
The move was welcomed by the heads of the US Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.
“This statement of support from a group of major banks is very welcome and demonstrates the resilience of the banking system,” they say said in a joint statement.
Washington is doing everything it can to avoid a financial crisis after the rapid collapse of Silicon Valley Bank late last week, after it experienced a traditional bank run in which depositors rushed to withdraw their money in one go.
It was the second largest banking collapse in US history after the 2008 bankruptcy of Washington Mutual. And the financial carnage continued with the subsequent collapse of New York-based Signature Bank over the weekend.
For its part, First Republic Bank announced on Sunday that it had bolstered its financial health by accessing funding from the US Federal Reserve and JPMorgan Chase.
However, the White House and other federal agencies had been closely monitoring developments at First Republic and other smaller banks following actions to protect depositors following the collapse of Silicon Valley Bank, a White House official told Reuters news agency Tuesday.
First Republic was one of the banks more pressured by concerns about another run on a regional bank and a significant shift in deposits to larger banks.
The implemented rescue plan for First Republic prevents an outright takeover of the bank by a larger institution, which would have run counter to widespread White House pressure against excessive concentration in other US sectors.
The Fed also underlined its overall support for the banking sector, saying, “As always, the Federal Reserve stands ready to provide liquidity to all eligible institutions through the discount window.”
Thursday’s announcement came just hours after Treasury Secretary Janet Yellen tried to assure US lawmakers that the country’s banking sector remained “healthy” despite recent bank failures.
Yellen is the first official in President Joe Biden’s administration to face lawmakers over the decision to protect uninsured money at banks in Silicon Valley and Signature.
“I can assure the members of the committee that our banking system is sound and that Americans can be confident that their deposits will be there when they need them,” she said during a Senate Finance Committee hearing on Thursday morning.
“This week’s actions demonstrate our resolute commitment to ensuring that our financial system remains strong and depositors’ savings remain safe.”