First Republic is bought by a large bank

First Republic: An FDIC-Induced Mass Exodus of Silicon Valley Bank and First Citizens to Scale up the Silicon Valley Ecosystem

First Republic was taken over by the F.D.I.C. and immediately sold to JPMorgan Chase, making it the second biggest U.S. bank by assets to collapse after Washington Mutual in 2008.

The California Department of Financial Protection and Innovation took possession of First Republic on Monday.

The FDIC actions come as regulators themselves have been under scrutiny about whether they could have done more to prevent the failures of Silicon Valley Bank and Signature Bank.

The acquisition of Silicon Valley Bank by First Citizens was backed by a government-sponsored transaction that included the purchase of about 70% of the bank’s loans. It also included the transfer of all the bank’s deposits, which were worth $56 billion. The bank had securities and other assets not included in the sale and were held by the F.D.I.C.

“That mass exodus that people were worried about just did not happen,” says an analyst at Wells Fargo Securities, who added that lenders were proactive.

Banks reached out to their customers, explaining their balance sheets and where their funds come from, one of the ways they did a good job.

The Fed’s vice chair for supervision blamed bank executives and said the Fed was investigating what went wrong but gave no explanation as to why supervisors did not prevent the collapse.

The Federal Reserve, the Treasury Department and the F.D.I.C. announced that “depositors will have access to all of their money” and that no losses from either bank’s failure would be “borne by the taxpayer.”

In a letter to stakeholders, Silicon Valley Bank said it needed to shore up its finances, announcing a roughly $1.8 billion loss and a plan to raise $2.25 billion in capital to handle increasing withdrawal requests amid a dim economic environment for tech companies.

Silvergate, the California based bank that made loans to cryptocurrencies, will cease operations and liquidate its assets.

Gregory Becker, the chief executive of Silicon Valley Bank, urged venture capital firms to remain calm on a conference call. But panic spread on social media and some investors advised companies to move their money away from the bank.

A Silicon Valley Bank executive wrote in a note to clients that it had “been a tough day” but the bank was “actually quite sound, and it’s disappointing to see so many smart investors tweet otherwise.”

Investors began to dump stocks of the bank’s peers, including First Republic, Signature Bank and Western Alliance, which had similar investment portfolios. The nation’s largest banks were more insulated from the fallout, with shares of JPMorgan, Wells Fargo and Citigroup generally flat.

A lot of deposits left the bank after customers began panicking.

The Fed said it would have an emergency lending program that could allow it to provide additional money to eligible banks and help ensure they could meet the needs of all their depositors.

In a speech, President Biden insisted that taxpayers would not be forced to bail out the financial system because it was safe.

First Republic Bank and the Swiss Central Bank: When Banks Start to Run Out of Money, First Republic Comes Into Disagreement

Regional bank stocks plunged after the unexpected seizure of Silicon Valley Bank and Signature Bank, with shares of First Republic tumbling 60 percent.

Credit Suisse shares tumbled after investors started to fear that the bank would run out of money. The central bank of Switzerland will provide support to Credit Suisse if necessary.

The biggest banks in the US injected $30 billion into First Republic in order to save it. The plan was hatched by Ms. Yellen and Jamie Dimon, the chief executive of JPMorgan Chase. The private sector’s actions would help reinforce the stability of the banking system, said the Treasury secretary. The bank’s share price rallied on the announcement.

One day after the $30 billion lifeline was announced, First Republic’s stock plummeted again and it was in talks to sell a piece of itself to other banks or private equity firms.

Credit Suisse will be acquired by the largest bank in Switzerland for more than $3 billion. The National Bank of Switzerland agreed to lend up to 100 billion Swiss dollars to the bank that will be involved in the deal. The Swiss financial regulatory agency eliminated the need for shareholders in the other bank to approve the deal.

Source: https://www.nytimes.com/2023/05/01/business/banking-crisis-failure-timeline.html

Midsize Banks During the Trump Era: The Importance of More Resources for Global Financial Operations and the Resilience of Central Banks

In order to alleviate pressure on the global financial system, five global central banks, including the Fed, took steps to ensure dollars remained readily available.

Mr. Biden called on financial regulators to strengthen oversight of midsize banks that faced reduced scrutiny after the Trump administration weakened some regulations. The president proposed that banks have to protect themselves against potential losses, and maintain enough access to cash, as well as other things.

The officials at the Fed, F.D.I.C., and the Treasury Department faced questions from Congress about factors that led to the failures of Silicon Valley Bank and Signature Bank.

Many customers preferred larger institutions to be safer, according to the robust first-quarter earnings of the country’s largest banks.