America's largest banks moved Thursday 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 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 percent higher on Wall Street Thursday.
"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.
'Vote of confidence'
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo each are making a $5 billion uninsured deposit in First Republic, while Goldman and Morgan Stanley will put in $2.5 billion each.
A group of five other lenders, including PNC Bank and US Bank, are each allotting $1 billion.
In a statement, First Republic founder Jim Herbert and CEO Mike Roffler said the "collective support strengthens our liquidity position... and is a vote of confidence for First Republic and the entire US banking system."
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.
On Thursday, the Fed said it has lent US banks close to $12 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 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."
Data made available Thursday showed the vastness of the emergency assistance, with the Fed drawing an additional $152 billion in short-term borrowing for banks from its standing loan window, a dramatic increase against the roughly $5 billion from the previous week.
With the seizure of SVB and Signature, an additional $142.8 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 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.
'Elevated' outflow risk
Founded in 1985, First Republic is the 14th largest US bank by assets, with $212 billion at the end of 2022.
The lender headquartered in San Francisco is also present on the East Coast including in New York and Florida, as well as in western states such as Washington.
But the majority of the bank's "affluent" client base is concentrated in coastal urban areas, Morningstar analyst Eric Compton wrote in a recent note to clients.
The bank is known for private banking and wealth management. As a result of its clientele, it has a large percentage of uninsured deposits that has kept it under scrutiny after the failures of SVB and Signature.
Last week also saw the closure of crypto banking titan Silvergate, in the face of market turmoil and regulatory pressure.
Although First Republic's customers come from a wide range of sectors, there have been concerns that many of them might look to flee to the relative safety of big, well-capitalized Wall Street banks in light of the ongoing turbulence in financial markets.
According to S&P Global Ratings, 68 percent of the bank's accounts hold deposits of more than $250,000, the level automatically guaranteed by US regulators.