The US overhead is coordinating talks about an emergency intervention to save the First Republic Bank, Reuters news agency reports on the basis of insiders. The Ministry of finance, the central bank and regulator FDIC are trying to get companies from the financial sector to come to the aid of the medium-sized bank.
Attempts to bail out First Republic with help from the private sector have so far failed to reach agreement. It is still unclear whether the US government is willing to participate in a rescue operation. But the involvement of government agencies, according to a source from Reuters, gives directors of First Republic more confidence in the search for a solution.
The U.S. Treasury Department declined to respond to questions from Reuters about the news. The Central Bank Dome Federal Reserve and the FDIC were not immediately reachable for comment.
Earlier this year, a lot of unrest arose around medium-sized banks in the United States, due to the fact that Silicon Valley Bank and Signature Bank collapsed shortly after customers withdrew a lot of money from their accounts in a few days. First Republic is struggling with the same problem, because the bank’s assets fell by more than 40 percent in the past quarter.
Although the outflow of funds has become less intense at the end of March, First Republic has to make up for the losses with loans from the Federal Reserve on which interest must be paid. In addition, low-interest bonds from the bank’s portfolio have become less valuable because interest rates have risen in a short period of time. The solution is the sale of business units or the creation of a separate bank where all bad loans will be housed. But with each option, First Republic or a buyer of the bank has to absorb significant losses.
Eleven major banks also came to the bank’s aid in mid-March by depositing $ 30 billion with First Republic. The bank also announced this week that it will lay off at least a fifth of its staff.
About the author: Rick Culpepper
Rick Culpepper is of those journalists who dig the topic to the very bottom. He is often late with the delivery of the piece, but always does it perfectly. In his spare time, he collects data for one of the most high-profile investigations of corruption in the EU.