DThe US bank First Republic, which was in crisis, received a financial injection of 30 billion dollars (around 28 billion euros) from eleven major banks. “This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes,” said the financial institutions, including Bank of America, Citigroup and JPMorgan Chase, on Thursday. The joint approach also shows the confidence of the major banks “in the country’s banking system”.
On Wall Street, prices have recovered after positive signals from the banking sector, which has recently been under pressure. The Dow Jones index of standard values closed on Thursday after a weak start with a plus of 1.2 percent and came to 32,246 points. The broader S&P 500 gained 1.8 percent to 3,960 jobs. The tech-heavy Nasdaq advanced 2.5 percent to 11,717 points.
Bank shares rise
Investors were encouraged by the fact that a total of 11 banks came to the rescue of the ailing regional bank First Republic. As a result, bank shares rose again. JP Morgan and Morgan Stanley each rose about 1.9 percent, while First Republic Bank closed 10 percent higher. The positive mood also spread to other regional banks.
The help from the Swiss National Bank for Credit Suisse also contributed to the good mood. US-listed shares rose after news of loans of up to $54 billion to bolster Credit Suisse liquidity and investor confidence.
“Regional, mid-sized and small banks are central to the health and functioning of our financial system,” the banks added in a joint press release. The big banks would now use their “financial strength and liquidity” where it is needed most.
Banks Citigroup, Bank of America, JPMorgan Chase and Wells Fargo all have uninsured deposits of $5 billion each at First Republic Bank. Goldman Sachs and Morgan Stanley each contributed $2.5 billion. The banks BNY Mellon, PNC Bank, State Street, Truist and US Bank are each providing $1 billion.
Slipped into crisis because of SVB bankruptcy
The San Francisco-based regional bank First Republic was in trouble in the wake of the collapse of the Silicon Valley Bank (SVB). The bank’s stock has lost massively in value since the middle of last week. Media reports about a possible injection of billions caused the bank’s share price to skyrocket on Thursday.
The SVB bankruptcy – the largest bank failure in the US since the financial crisis of 2008 – has caused significant turmoil in the US and internationally, causing difficulties for a number of banks. The Californian bank, which is primarily active in the technology sector, collapsed last week after a massive withdrawal of customer deposits.
“Our banking system is solid”
As a result, the New York-based Signature Bank also had to be closed. The US government intervened vigorously and promised, among other things, a guarantee for all customer deposits at the two banks.
Treasury Secretary Janet Yellen tried again on Thursday to reassure the public. “Our banking system is sound, and Americans can be assured that their deposits will be there when they need them,” Yellen said at a hearing before the US Senate Treasury Committee. The US government has “taken decisive and forceful action to stabilize and strengthen public confidence in our banking system.”