Wall Street banks are investing $30 billion in First Republic

The largest US banks have joined forces to deposit $30 billion at First Republic Bank in a bid to bolster their finances and stem the fallout from last week’s collapse of two major lenders.

JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will each deposit $5 billion with First Republic, a California-based lender. Goldman Sachs and Morgan Stanley will each inject $2.5 billion, while BNY Mellon, PNC Bank, State Street, Truist and US Bank will each inject $1 billion.

“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together we are deploying our financial strength and liquidity into the larger system where it is most needed,” the banks said in a statement on Thursday.

JPMorgan, an advisor to First Republic, had been looking for competing lenders to put together an industry-backed solution for First Republic. The lender called several Wall Street banks Wednesday night to find financing, according to two people familiar with the matter.

According to a person involved in the talks, the banks had come under pressure from the government to help First Republic after their stocks fell and their debt rating was downgraded following the collapse of Silicon Valley Bank.

In a statement, US Treasury Secretary Janet Yellen, Federal Reserve Chair Jay Powell and senior regulators said, “This demonstration of support from a group of large banks is very welcome and demonstrates the resilience of the banking system.”

The Fed added that “as always . . . it is ready to make liquidity available to all eligible institutions through the discount window.”

First Republic shares, which fell 66 percent over the past week, rose more than 11 percent after the announcement.

To bolster its financial position, the bank drew funds from the Fed and JPMorgan on Sunday, giving it $70 billion in unused liquidity.

Collapse of the Silicon Valley Bank

Get the latest news and analysis on the fallout from the failure of Silicon Valley Bank, the startup lender that became the second largest bank failure in US history

First Republic struggled to restore investor confidence after SVB’s collapse on Friday, followed by Signature Bank on Sunday. The stock price has fallen more than 70 percent since the Federal Deposit Insurance Corporation took over SVB, prompting fears the contagion could spread to other regional lenders.

On Tuesday, Moody’s downgraded all of its long-term ratings for First Republic, saying they reflect the bank’s reliance on uninsured deposits and unrealized losses on held-to-maturity securities. Fitch and S&P Global downgraded First Republic’s credit rating on Wednesday.

First Republic’s troubles come despite President Joe Biden’s assurances that regulators would do “whatever it takes” to protect depositors and emergency funding measures by the US government to boost liquidity.

Video: Broken markets: the major threats to the financial system

https://www.ft.com/content/daf5d4cc-8d0d-47a3-9d10-4526683e8a4e Wall Street banks are investing $30 billion in First Republic

Brian Ashcraft

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