First Republic Bank plunges 50% to record low amid FDIC takeover concerns

Fears that the FDIC, or Federal Deposit Insurance Corp., could take over the lender, as it did with Silicon Valley Bank and Signature Bank last month, caused First Republic to fall even further on Friday morning. Due to concerns of low yielding assets and the need to pay more to finance it, the bank has seen a decline in deposits.

Reuters reported that US officials are coordinating talks to save the First Republic, with the Federal Deposit Insurance Corp, the Treasury Department and the Federal Reserve orchestrating meetings throwing a lifeline.

Bloomberg News reported that some of the biggest US banks, which have already contributed $30 billion to run the First Republic, have held off on getting more involved and potentially throwing away good money.

Since the failure of Silicon Valley Bank last month raised questions about the stability of other regional banks in the US, First Republic has come under pressure. On Bloomberg Television’s “Wall Street Week” with David Westin, Summers said, “I am shocked and dismayed that this situation has persisted as long as bank stocks have dropped 95%” and credit gauges have deteriorated. “I expect the best way forward will be found within the next week or 10 days between the banks, the FDIC, other public authorities.”

“These are things like wildfires, it’s a lot easier to contain them than it is to prevent them from spreading,” Summers said. He did not offer preference for an FDIC takeover or “something private sector oriented”. work out. “But we need to find the answer to that question as quickly as possible and move forward.”

According to a Reuters report, the FDIC, the Treasury Department and the Federal Reserve are among government bodies that have begun holding meetings with financial firms about a lifeline for the bank. One of the report’s sources told Reuters that the government’s involvement was helping bring more parties to the negotiating table, including banks and private equity firms.

“The worst-case scenario resulting from the collapse of the Silicon Valley banks has been averted,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. “But the First Republic’s problems are a reminder that further problems are possible,” Mark Haefele continued.

Since First Republic received $30 billion in deposits from America’s 11 largest lenders on March 16, resulting in the collapse of Silicon Valley Bank and Signature Bank, Wall Street institutions have been scrambling to find an exit strategy for First. working for. Republic. Discussions for a resolution took a new focus this week after First Republic disclosed on Monday that it had deposit outflows of more than $100 billion in the first quarter. The bank admitted that it was losing money, claiming that its deposits had frozen because it had to pay the Federal Reserve interest-bearing funds to replenish withdrawn deposits.

(with inputs from agencies)