Big lenders to inject billions of dollars into embattled First Republic Bank

Big lenders to inject billions of dollars into embattled First Republic Bank

Big lenders to inject billions of dollars into embattled First Republic Bank

The biggest U.S. banks plan to inject as much as $30 billion into First Republic Bank in an effort to bolster the beleaguered San Francisco lender as concern about the financial system spreads, according to three bank executives with knowledge of the move.

The plan is being discussed with government regulators, according to the executives, who were granted anonymity to talk about the deliberations.

Days after federal regulators backstopped uninsured accounts at two failed banks, at least eight of the country’s largest lenders are stepping in to offer First Republic funds, the executives said. One executive said the total infusion remained uncertain and could be announced either Thursday or Friday.

JPMorgan Chase, Bank of America and Citigroup are each expected to inject $5 billion, with other institutions providing smaller amounts. The executives said various drafts of an announcement continued to circulate on Thursday but that the arrangements were nearly finalized. The other banks are Wells Fargo, Morgan Stanley, USBancorp, PNC Financial and Truist.

The injection of fresh capital is intended to buoy First Republic, the country’s 14th-largest bank by assets, after U.S. banks were rocked by the failures of Silicon Valley Bank and Signature Bank. Fear of financial instability has ricocheted across Wall Street and among Washington policymakers amid speculation that more bank failures could come.

More than two-thirds of First Republic’s domestic deposits exceed the FDIC’s insurance limit of $250,000 per person, per bank. Investors’ uncertainty over the bank’s prospects prompted Fitch Ratings to downgrade its credit rating on Wednesday.

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.

A First Republic spokesperson said the bank had no comment.

President Joe Biden and Treasury Secretary Janet Yellen have sought to assuage concerns about the system. “Our banking system remains sound,” Yellen told the Senate Finance Committee on Thursday. “Americans can feel confident that their deposits will be there when they need them.”

The rescue package announced Sunday 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 banking sector’s recent troubles have set off a frenzy of finger-pointing on Capitol Hill about the root cause. Republicans have gone after the Fed, whose aggressive rate hikes in the last year have diminished the value of the bonds and loans that banks hold on their balance sheets.

Sen. Elizabeth Warren (D-Mass.) has blamed a bipartisan law passed in 2018 for loosening certain post-financial-crisis banking reforms. Many policymakers have pinned it on the banks’ management teams.

Shares in First Republic bounced on the news, ending a two-week-long slide that dropped the stock price by nearly 75 percent.

Sam Sutton contributed reporting.


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