US banks rally to support First Republic Bank amid crunch
A consortium of large US banks pumped $30 billion to prevent First Republic Bank from going under. Fear over a looming financial crisis has been high since two US mid-sized lenders collapsed last week
A group of US banking giants joined forces on Thursday to support First Republic Bank amid growing worldwide concern regarding the resilience of the banking system and the possibility of a financial crisis.
US private banks, including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp, Wells Fargo & Co, Goldman Sachs and Morgan Stanley, were involved in the bailout.
The banks injected $30 billion (roughly €28.2 billion) to support First Republic Bank as the lender struggled with high interest rates imposed last year to avoid a recession amid high inflation. The regional bank's shares had tumbled 70% in the last nine trading sessions.
US regulators praised the move as a testament to the banking system's resilience.
The rescue announcement was credited for uplifting Wall Street indexes on Thursday.
What do we know about the rescue plan?
The consortium of 11 US private banks said in a Thursday statement that their move "reflects their confidence in First Republic and in banks of all sizes."
In a statement, First Republic founder Jim Herbert and CEO 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."
First Republic Bank is the 14th largest bank in the US, with $212 billion in assets at the end of 2022. Founded in 1985, the bank is headquartered in San Francisco.
Known for private banking and wealth management, First Republic was wary its clients would flee to bigger banks amid the ongoing turbulence in the banking sector.
What is happening to the banking sector?
The US banking sector was significantly shaken last week by the collapse of two mid-sized lenders.
US regulators pulled the plug on Silicon Valley Bank in the largest bank failure since the 2008/2009 financial crisis after a sudden run on deposits. New York's Signature Bank followed suit two days later, as the US Federal Reserve took steps to shore up systemic confidence.
US authorities were quick to pledge support to other lenders and depositors as fears over a looming financial crisis grew. The move slightly reassured investors, but shares in several US banks were hammered on fears of a run by customers.
The aftershock traveled to Europe on Thursday, with Switzerland-based global bank Credit Suisse AG saying it would borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country's central bank to strengthen its liquidity and deposit reserves.
rmt/sms (AFP, Reuters)
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