US banks rallied to support First Republic Bank amid crisis.
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A group of U.S. banking companies joined forces Thursday to support First Republic Bank amid growing worldwide concern about 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.
Banks injected $30 billion (about 28.2 billion euros) to support First Republic Bank as the lender struggled with higher interest rates imposed last year to avoid recession amid high inflation. Shares of the regional bank had fallen 70 percent in the past nine trading sessions.
US regulators hailed the move as evidence of the banking system’s resilience.
The bailout announcement was credited with boosting Wall Street indexes on Thursday.
What do we know about the rescue plan?
A consortium of 11 US private banks said in a statement on Thursday that their move "Reflects their confidence in First Republic and banks of all sizes."
In a statement, First Republic founder Jim Herbert and CEO Mike Roeffler said "Collective support strengthens our liquidity position… and is a vote of confidence in First Republic and the entire US banking system."
First Republic Bank is the 14th largest bank in the United States with assets of $212 billion at the end of 2022. Established in 1985, the bank is headquartered in San Francisco.
Best known for private banking and wealth management, First Republic was wary that its clients would flee to the big banks amid ongoing turmoil in the banking sector.
What is happening with the banking sector?
The US banking sector was significantly shaken by the collapse of two mid-sized lenders last week.
US regulators pulled the plug on Silicon Valley Bank in the biggest bank failure since the 2008/2009 financial crisis after a sudden run on deposits. Signature Bank of New York followed suit two days later, as the US Federal Reserve took steps to boost systemic confidence.
US officials were quick to pledge cooperation with other creditors and collectors as fears of a looming financial crisis grew. The move gave some reassurance to investors, but shares of several US banks suffered on fears of a run by customers.
Aftershocks 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 shore up its liquidity and deposits. The reserves can be strengthened.
rmt/sms (AFP, Reuters)
