American attempts to rescue First Republic Bank and a $30 billion deposit package for the bank
Informed sources confirmed to Bloomberg that the US administration is currently working to organize a rescue operation for First Republic Bank, by concluding an agreement with the largest banks in the country, to deposit about $30 billion in the distressed bank, in an attempt to protect it from slipping into the fate of Silicon Valley and Signature Banks, which collapsed. last week.
Bloomberg quoted its sources as saying that the participating banks include Bank of America, JPMorgan, Citigroup, BNC Financial Services and Wells Fargo.
Details of the rescue operation are expected to be announced on Thursday.
The share price of First Republic Bank was severely affected in trading on the first day of this week, in the wake of the collapse of Silicon Valley and Signature Banks, in conjunction with growing fears of the spread of deposit withdrawal infection and liquidity crisis among US banks. The bank’s share lost more than 60% of its value in one day, and the cost of insuring its debts in the markets doubled.
And with the beginning of the delivery of the International Deposit Insurance Corporation, the US Treasury and the Federal Bank, all customer deposits in the two collapsed banks, regardless of whether they were insured or not, the bank’s share, headquartered in California, rose by nearly 50%, but it was unable to to maintain those gains for a long time.
The bank is exploring options, including increasing capital, to strengthen its financial position, after losing nearly a fifth of its value again in Thursday’s trading.
One person familiar with the Financial Times said that there is no guarantee that the US bank will succeed in raising more funding, in which case it may have to explore a sale.
The First Republic Bank obtained approval for a financing line from the Federal Reserve and JPMorgan, the largest US bank by assets, at the beginning of this week, to enhance its financial position, in the range of $ 70 billion, which has not yet been used, according to the Financial Times.
The bank can also obtain additional liquidity, using the new window approved by the Federal Bank and the Treasury Department at the beginning of this week, and by guaranteeing the high-quality bonds in its possession.
The First Republic Bank struggled to restore confidence among investors in the wake of the collapse of Silicon Valley Bank on Friday and Signature Bank over the weekend, and its stock is currently trading down 70% from what it was at the end of last week, despite easing investor concerns that the closure will extend to lenders. other regional.