The United States eleven biggest banks declared a $30 billion rescue package for First Republic Bank to save the California-based bank from becoming the third bank to collapse in a week.
First Republic assists the Silicon Valley Bank, which failed on Friday after depositors withdrew about $40 billion. It is witnessing that the First Republic, depositing $176.4 billion as of December 31, was facing a similar crisis.
In a statement, the group of banks assured other unnamed banks witnessed large withdrawals of uninsured deposits, exceeding the $2,50,000 level insured by the Federal Deposit Insurance Corporation. First Republic’s shares plunged more than 60% Monday after the bank stated its additional secured funding from JPMorgan and the Federal Reserve.
Thursday, the bank’s shares plunged 36% but rallied after a rescue package was in the works and closed up nearly 9%.
JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo have decided to each fund $5 billion in uninsured deposits into the First Republic. Meanwhile, a $2.5 billion amount would be deposited by Morgan Stanley and Goldman Sachs each into the bank. The outstanding $5 billion would comprise of $1 billion fund from BNY Mellon, PNC Bank, State Street, Truist, and US Bank.
“The actions of the largest US banks reflect their confidence in the country’s banking system,” the banks said in a statement. China’s banking regulator also expressed support for the bank rescue plan.
The news could relieve the bank investors after the last week’s breakdown of Silicon Valley Bank, the second biggest bank failure in US history after the Washington Mutual demise in 2008.
The collapse of Silicon Valley Bank on Friday and New York-based Signature Bank two days later brought back bad memories of the financial crisis that plunged the US into the Great Recession of 2007-2009.
The federal government firm to restore public confidence in the banking sector to protect all the banks’ deposits, exceeding the FDIC’s $2,50,000 limit per individual account.