Newsman: At least eight of the country’s largest lenders are stepping in to offer First Republic funds. The biggest U.S. banks are pouring $30 billion into First Republic Bank to bolster the beleaguered San Francisco lender and try to quell growing concern about the health of the nation’s financial system. The infusion of money is intended to sweep away fears by depositors and investors that First Republic and other midsize banks could fall victim to perilous runs.
Federal regulators said it demonstrates “the resilience of the banking system,” according to a joint statement from Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, FDIC Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will each kick in $5 billion, with other institutions providing smaller amounts, according to a statement by the lenders.
“The banking system has strong credit, plenty of liquidity, strong capital and strong profitability,” the banks said in a joint statement. “Recent events did nothing to change this.”
The coordinated action by 11 top lenders comes amid the fallout from the stunning failure of Silicon Valley Bank last week.
In the aftermath of the bank failures, the Federal Reserve has seen a sharp increase in loans extended to financial institutions.
Under an existing primary credit lending program, banks borrowed $148.2 billion in the week ending Wednesday, resulting in a record $152.9 billion of outstanding loans. In addition, the new facility —the Bank Term Funding Program — saw an initial draw of $11.9 billion of loans.
First Republic, the country’s 14th-largest bank by assets, was rocked by the collapse of Silicon Valley Bank in a $42 billion run on deposits late last week. Signature Bank, a New York institution with deep ties to the crypto industry, was shuttered by regulators on Sunday.
More than two-thirds of First Republic’s domestic deposits exceed the FDIC’s insurance limit of $250,000. Investors’ uncertainty over the bank’s prospects prompted Fitch Ratings to downgrade its credit rating on Wednesday. But stocks surged on the First Republic news, with the Dow Jones Industrial Average rising more than 300 points.
Nearly 94 percent of domestic deposits at Silicon Valley Bank were uninsured, as were almost 90 percent of Signature’s, according to S&P Global Market Intelligence data.
The rescue package announced for Silicon Valley Bank and Signature Bank guaranteed all the lenders’ deposits, even for the uninsured. Separately, the Fed set up a facility to make cash loans available to all banks for up to a year in exchange for safe collateral, which would theoretically allow the lenders to handle deposit withdrawals of any amount.
The Fed also disclosed that there was $142.8 billion of loans made to the so-called bridge banks that were set up as operating vehicles for Silicon Valley Bank and Signature.
