Major US banks have come together to support First Republic Bank, a regional lender based in California, in an effort to prevent it from collapsing. The move comes after the recent collapse of Silicon Valley Bank, which experienced a bank run, and the subsequent collapse of New York-based Signature Bank. The rescue plan for First Republic involves 11 private US banks depositing $30bn into the bank, with Bank of America, Citigroup, JPMorgan Chase and Wells Fargo each making an uninsured deposit of $5bn. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5bn, while BNY-Mellon, PNC Bank, State Street, Truist and US Bank are each making an uninsured deposit of $1bn. The move has been welcomed by the heads of the US Department of the Treasury, Federal Reserve, Federal Deposit Insurance Corporation and Comptroller of the Currency.
The rescue plan for First Republic averts an outright takeover of the bank by a larger institution, which would have gone against a broad White House push against excessive concentration in other US sectors. The Fed has also underscored its overall support for the banking sector, saying that it stands ready to provide liquidity through the discount window to all eligible institutions. The announcement came just hours after Treasury Secretary Janet Yellen reassured US legislators that the country’s banking sector remained “sound” despite the recent banking failures. Yellen is the first official from President Joe Biden’s administration to face legislators over the decision to protect uninsured money at Silicon Valley and Signature banks.
First Republic was one of the banks that had been under more stress amid worries of another run on a regional bank, and a significant shift in deposits to larger banks. The move by major US banks to shore up First Republic is an effort to ease fears that it could be the next domino to fall after the second-largest banking collapse in US history. Shares of First Republic pared earlier losses to trade higher on Wall Street on Thursday following reports it could receive the infusion of funds from some of the country’s most prominent financial institutions.
The move by major US banks to support First Republic demonstrates the resilience of the banking system and Washington’s commitment to preventing a financial crisis. The recent banking failures have prompted Washington to take action to prevent further collapses and ensure that depositors’ savings remain safe. The rescue plan for First Republic is a positive step towards stabilizing the banking sector and preventing further damage to the US economy.