First Republic Bank rescued with $30 billion deposited by 11 banks

First Republic Bank was bailed out with $30 billion in deposits from 11 banks after facing falling stock prices and fleeing depositors, the Treasury, Federal Reserve, Federal Deposit Insurance Corp said. and the Office of the Comptroller of the Currency in a joint statement. statement Thursday.

The $30 billion deposit is far more than previous negotiations indicated. According to the wall street journal, “JPMorgan, Citigroup, Bank of America and Wells Fargo were in earlier talks to each deposit $5 billion of their own money with the lender.” But the final bailout included 11 banks and $30 billion in capital to keep the bank from collapsing.

The banks that have come to the rescue are Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, which will each contribute around $5 billion. Goldman Sachs and Morgan Stanley will deposit about $2.5 billion, according to the banks’ press release. Truist, PNC, US Bancorp, State Street and Bank of New York Mellon will each deposit around $1 billion. Massive deposits are obligated to stay in the First Republic for at least 120 days, according to CNBC.

The bank had suffered a share price decline in recent days, fueled by the collapse of Silicon Valley Bank and Signature Bank over the weekend. An underlying factor driving Silicon Valley Bank’s initial run was the FED’s interest rate hikes due to President Joe Biden’s soaring inflation. Due to interest rates rising to curb inflation, borrowing money has become more expensive for businesses, forcing commercial depositors to access their savings with the institution.

The turmoil in the banking sector has impacted First Republic Bank, necessitating a bailout of competitors. CNBC reported:

Shares of First Republic, which closed at $115 per share on March 8, traded below $20 at one point on Thursday. The stock was broken several times during the session and was up nearly 10% on the day, closing at $34.27 per share.

The bank had said on Sunday that it had more than $70 billion in available cash, not including any additional funds it could potentially raise from the Federal Reserve’s term funding program, but that was not enough to prevent investors from dumping the stock.

Deposits from major banks will add to this liquidity.


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