A group of the nation’s biggest banks swooped in on Thursday afternoon to rescue First Republic Bank with a $30 billion deposit, a move intended to shore up the beleaguered San Francisco lender.
The 11 banks include JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Morgan Stanley, U.S. Bancorp, Truist Financial and PNC.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” federal officials said in a statement.
S&P Global Ratings and Fitch Ratings cut First Republic to junk earlier this week amid concern that clients pull holdings from the lender.
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The concerns at First Republic and other midsize regional banks began after the historic failure of Silicon Valley Bank — the 16th largest in the country — on Friday afternoon following a liquidity crunch. It marked the largest U.S. bank failure since the global financial crisis in 2008.
SVB, which largely catered to tech companies, venture capital firms and high-net-worth individuals, saw a huge boom in deposits during the pandemic, with its assets surging from $56 billion in June 2018 to $212 billion in March 2023. The bank responded by investing a large chunk of that cash into long-term U.S. Treasury bonds and other mortgage-backed securities. However, that strategy backfired when the Fed embarked on the most aggressive interest-rate hike campaign since the 1980s and the value of those securities tumbled.
That coincided with a decline in available funding for startups, which started drawing down more of their money to cover their expenses, forcing the lender to sell part of its bond holds at a steep $1.8 billion loss. When depositors realized that SVB was in a precarious financial situation, a bank run ensued.
This is a developing story. Please check back for updates.