Leading US banks rescue distressed lender
A group of the largest US banks unveiled a $30 billion injection in troubled regional lender First Republic to inspire confidence in the country’s banking system amid a widening crisis triggered by the collapse of two other mid-size lenders.
First Republic will receive uninsured deposits from the country’s eleven banking majors – Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and US Bank – according to a statement released by First Republic on Thursday evening.
The deposits must stay at the bank for at least 120 days, according to a statement by First Republic.
First Republic’s shares have pared some of their earlier losses. Earlier this week, the lender’s stock price plunged 61.8%, forcing a brief halt in trading due to volatility. The drop marked an extension of a 33% plunge recorded the previous week.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they would each make a $5 billion uninsured deposit, while Goldman Sachs and Morgan Stanley are each depositing $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist, and US Bank $1 billion each.
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a joint statement.
The US banking sector has been hit by a major crisis following the collapse of Silicon Valley Bank last week after depositors rushed to withdraw their money amid worries over the bank’s financial health.
Silicon Valley Bank, a major player serving the tech and startup sectors, was shut down by regulators shortly after California-based, crypto-focused Silvergate liquidated its bank earlier last week. New York-based Signature Bank was also shut down by regulators last weekend due to liquidity concerns.
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