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In a bit to prevent a third bank in the US to fail, eleven of the biggest banks in the United States on Thursday announced a $30 billion rescue package for First Republic Bank.
It appears that the California-based bank with deposits totaling $176.4 billion as of December 31 was facing a similar crisis, according to the news agency AP report. It could be the third US bank to fail in less than a week.
First Republic also caters to similar clientele as Silicon Valley Bank, which collapsed last week after depositors pulled back nearly $40 billion. In a statement, the group of banks revealed that other unnamed banks had witnessed large amounts of withdrawals of uninsured deposits, which are those that exceed the $2,50,000 level insured by the Federal Deposit Insurance Corporation.
First Republic’s shares nosedived more than 60 percent on Monday, even after the bank said it had secured additional funding from JPMorgan and the Federal Reserve.
ALSO READ: Silicon Valley Bank Debacle And A Lesson For India’s Banking Sector
On Thursday, the shares were down as much as 36 per cent but surged after reports came in about the rescue package and closed nearly 9 per cent up.
Which banks are bailing out First Republic?
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will be putting $5 billion in uninsured deposits into the First Republic. Meanwhile, Morgan Stanley and Goldman Sachs would deposit $2.5 billion each into the bank. The remaining $5 billion would consist of $1 billion contributions from BNY Mellon, State Street, PNC Bank, Truist and US Bank.
“The actions of America’s largest banks reflect their confidence in the country’s banking system,” the banks said in their statement.
The nation’s banking regulators also issued a statement on the rescue package. “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said Treasury Secretary Janet Yellen, Acting Comptroller of the Currency Michael Hsu, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin Gruenberg.
Silicon Valley Bank was the second biggest bank failure in US history since the failure of Washington Mutual in 2008.
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