After the collapse of Silicon Valley Bank on Friday, a group of financial institutions agreed to deposit a whopping sum of $30 billion in the First Republic Bank, according to a release on Thursday. In the most recent world news, the banks that contribute $5 billion each include JP Morgan Chase, Citigroup, Wells Fargo, and Bank of America.
The largest banks in the US are committed to serving their customers
Other financial institutions that will contribute $2.5 billion each are Morgan Stanley and Goldman Sachs. First Republic Bank will also receive deposits of $1 billion each from the Bank of New York Mellon, State Street, U.S. Bancorp, PNC, and Truist. In a statement, the group said the deposits poured in by the largest banks in the US would improve public confidence in First Republic Bank and similar banks. The deposits by the large banks show their commitment to serving the communities and customers.
According to information gathered from US news websites, the largest banks in the US would retain their deposits at First Republican Bank for at least 120 days. After falling initially on Thursday, the regional bank stocks recouped their losses. It is against the backdrop of an infusion of capital by the largest financial institutions and news of support for the banking system.
Unsecured funds in the First Republic, SVB, Signature Bank
The news of First Republic Bank’s support from the country’s largest banks comes after its stock price plummeted following the weekend failures of Signature Bank and Silicon Valley Bank. Both Silicon Valley Bank and Signature Bank held large sums of unsecured public money. First Republic Bank also had the unsecured deposits of several people and raised security concerns. It resulted in the withdrawal of the deposits by the public. The newly injected funds into First Republic Bank are unsecured.
The stock of First Republic Bank crashed below $20 from $115
Amid the news of the collapse of Silicon Valley Bank on Friday, the stock price of First Republic Bank declined sharply to below $20 at one point from a high of $115 on March 8, 2023. The trading of First Republic Bank stock was halted several times during the trading session and recovered 20% to close at $40.
According to today’s latest USA news, First Republic Bank had over $70 billion in liquid cash without counting additional funds it plans to mobilize through the Bank Term Funding Program from the Federal Reserve. However, this amount is not sufficient to improve the confidence levels of investors and prevent them from selling the bank’s stock. The bank would add additional funds as several large banks in the US would support it with unsecured deposits.
In a joint statement, the Office of the Comptroller of the Currency, the FDIC, the Treasury Department, and the Federal Reserve welcomed the move of the largest banks in the US to rescue First Republic Bank and boosted confidence among the general public in the banking system.
The larger firms have acquired several struggling banks during the financial crisis for cheaper valuations to support the banking system. According to the sources, unrealized losses in the bond portfolio of First Republic Bank because of increased interest rates last year amounting to $25 billion have made the takeover unappealing.