The US First Republic Bank received $30 billion in deposits from 11 major US banks as part of a rescue operation. Reports CNBC, citing a joint statement by credit institutions released on Thursday, March 16.
Money for the uninsured deposit was allocated by Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Staney and a number of other credit institutions. Some of them were sent to First Republic Bank for temporary assistance of five billion dollars, and another part – one billion each.
Thus, large banks confirmed their intention to help small and medium-sized credit institutions and expressed their confidence in them, the statement says. It is also specified that the transferred money will have to remain in the First Republic for 120 days.
After the bank received deposits, its shares initially went up, but then collapsed again by 20%. This raised doubts among many large US investors, who note that default risks could spread to large banks.
First Republic Bank’s bailout comes after reports this week that the bank’s management is considering selling it, along with other strategic options. After that, the rating agencies S&P Global Ratings and Fitch Ratings downgraded the ratings of First Republic Bank to the levels of the speculative category.
Earlier, on March 11, it became known about the bankruptcy of Silicon Valley Bank in the USA. The organization went bankrupt in less than two days. After the bank made an unsuccessful operation with securities, depositors began to withdraw funds sharply from their accounts.
After the sale of the British branch of the bankrupt Silicon Valley Bank, shares of American banks began to lose positions in the auction. Thus, Western Alliance securities fell by more than 44%, and First Republic Bank by almost 59%. Shares of banks PacWest, Zions and UMB Financial fell in price by 20.7-27.5%.
The next day, Axios reported that the administration of US President Joe Biden would soon face a crisis in the banking system. The publication notes that if the US government does not arrange a deal to save Silicon Valley Bank depositors before branches open on March 13, the Cabinet will face a catastrophic crisis.
At the same time, information appeared that the US authorities were not considering the possibility of buying out the bankrupt SVB. According to Treasury Secretary Janet Yellen, the current situation is different from the financial crisis of 2008, when the government bailed out many banks to protect the country’s economy.
In turn, Biden tried to convince American citizens that they can be confident in the security of the country’s banking system. He vowed to ask Congress and “banking regulators to tighten rules on banks and reduce the risk of this kind of bank failure happening again” and to protect jobs and small businesses in the country. According to the American leader, the situation around bankrupt banks will not affect taxpayers.
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