Some of the largest US banks launched a joint rescue package Thursday night to bail out a smaller US lender amid fears of contaminating the broader banking sector.
As part of the plan, up to $30 billion will be sent to First Republic Bank to prevent it from becoming the latest US bank failure since last week’s collapse of Silicon Valley Bank (SVB) and Signature Bank.
“The actions of America’s largest banks reflect their confidence in the national banking system. Together, we are putting our financial strength and liquidity into the larger system where it is needed most,” the joint statement said.
Banks such as Bank of America, Wells Fargo, Citigroup and JPMorgan Chase have been involved in providing assistance. Others were Goldman Sachs and Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist and US Bank.
The San Francisco-based First Republic has been under pressure since the collapse of the SVB a week ago. First Republic’s stock prices plummeted, and nervous customers quickly withdrew their money, fearing they might be the next victim.
First Republic insists it is financially stable and that losing so many deposits is not devastating. However, the S&P rating agency downgraded its bonds to junk status and a rescue plan was launched.
The big banks acted quickly to protect the entire US banking system amid uncertainty in the banking sector as a whole.
US Treasury Secretary Janet Yellen, Federal Reserve Chair Jay Powell and top regulators issued a statement saying, “This show of support from a group of large banks is very welcome and demonstrates the resilience of the banking system.”
The Federal Reserve, the Fed, said it was “ready to provide liquidity to all relevant institutions through the discount window.”
Ms. Yellen has previously battled major bank failures, so now all deposits are covered by a government guarantee.
Ms Yellen said at a Senate hearing: “This is the only appeal the bank is getting.” [if] The Boards of Directors of the Federal Reserve, the Federal Deposit Insurance Corporation, and I, in consultation with the President, have determined that failure to protect uninsured depositors will result in systemic risk and significant economic and financial consequences.
She said the “strong and decisive” emergency measures taken following the failure of SVB and Signature Banks helped restore depositor confidence and prevent large-scale bank runs.
Similar assurances were issued by the European Central Bank on Thursday after global currency markets faced turmoil that wiped out billions of dollars in the value of the company’s shares as concerns about Credit Suisse Bank’s viability intensified.
After a crisis of confidence that wiped out 25 percent of Credit Suisse’s share value on Wednesday, the bank turned to the Swiss National Bank for emergency funding, the first time a major bank had been forced to seek bailout since the 2008 financial crisis. .
Concerns about Credit Suisse’s financial position eased after the company announced it would borrow a whopping CHF50bn (£44.4bn) from the Swiss National Bank to dispel fears it doesn’t have enough assets to bail them out to invest. in company.
The ECB said eurozone banks are “strong, with strong capital and liquidity”.
ECB President Christine Lagarde also said she has the resources to “provide liquidity support” if needed.
Source: I News
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