The shares of First Republic Bank have reached record lows due to depositors withdrawing over $100 billion in the first quarter, following a series of bank failures in the US that sparked fears of a wider crisis.
The bank’s advisers are leading private-sector initiatives, but an agreement has not been reached. US officials stepped in to coordinate urgent talks to rescue the San Francisco-based bank founded in 1985.
Chaos in First Republic
Fears of contagion across the banking sector rose after the recent collapses of Silicon Valley Bank (SVB) and Signature Bank. Investors are closely following the financial health of regional lenders, including First Republic.
According to Reuters, US government authorities including the Federal Deposit Insurance Corporation (FDIC), the Treasury Department, and the Federal Reserve have started conducting meetings with financial companies to bring more parties, including banks and private equity firms to the negotiating table, but it is unclear if the government is planning a private-sector rescue with its involvement. The move has encouraged First Republic executives, who are struggling to avoid a takeover by US regulators.
Two sources quoted by Reuters suggest that US officials view a private-sector deal as preferable to First Republic falling into FDIC receivership. Options proposed to avoid this include selling assets or creating a “bad bank” to isolate its underwater assets, but a deal has yet to be reached.
“Any solution would have to come with coverage for the losses that the First Republic or a potential acquirer of the bank would assume if there were a transaction. These losses would stem from First Republic’s loan book and fixed-income portfolio, whose low-yielding assets would be marked down to account for a rise in interest rates.”
Where Does Bitcoin Stand?
The US banking crisis has taken a heavy toll on financial institutions this year, while Bitcoin has gained a foothold near $30k. Despite First Republic disclosing a loss of nearly $100 billion in deposits and experiencing declining confidence from analysts and investors, Bitcoin has seen increased interest as trust in the US banking system declines.
Featured Image Courtesy of FT
