AMERICA’S LARGEST BANKS have moved to shore up First Republic, easing fears that the regional lender could be the next domino to fall after collapses including Silicon Valley Bank.

A consortium of 11 US private banks, including Bank of America, Citigroup and JPMorgan Chase, announced they would deposit $30 billion (€28.13 billion) into First Republic.

The move marks a dramatic initiative by the lenders to bolster the system following failures of three midsized lenders in the last week.

“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes,” the group said in a joint statement.

“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said.

Shares of First Republic reversed earlier losses to close 10% higher on Wall Street yesterday.

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said leaders of the Treasury Department, US Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency in a joint statement.

The action comes on the heels of emergency measures taken late Sunday by the Federal Reserve and other US regulators to assure all depositors of two failed banks, Silicon Valley Bank and Signature Bank.

The Fed yesterday said it has lent US banks close to $12 billion (€11.25 billion) under a new one-year lending program unveiled Sunday as authorities moved to ease stress on the financial system.

The total outstanding amount of all advances under the Bank Term Funding Program reached $11.9 billion (€11.16 billion) by Wednesday, the central bank said.

In its earlier statement, the Fed said it was making additional funding available “to help assure banks have the ability to meet the needs of all their depositors.”

With the seizure of SVB and Signature, an additional $142.8 billion (€133.88 billion) was poured into the bridge banks created by regulators for the two collapsed banks, pushing the Fed’s balance sheet up by about $300 billion (€281.27) in the past week.

Last Friday’s SVB failure has sparked concerns about a contagion effect, with especially keen worries that more banks could suffer a run by depositors.

The crisis has also spread to Europe, with the Swiss central bank intervening to support Credit Suisse after it came under pressure.

– © AFP 2023