Officials in the United States are reportedly deliberating on extending an emergency line of credit for banks “so” it can give First Republic Bank some time to address its balance sheet problems, according to people. with knowledge of the situation.
In a March 26 Bloomberg report citing unnamed sources, it was reported that US officials have not decided what “if any” support they can provide to the First Republic, however an “expansion of the Federal Reserve offer” is one of the options being considered. They are considering.
Regulators reportedly deemed First Republic “stable enough to operate” without the need for “immediate intervention” as the bank and its advisers attempt to “strengthen its balance sheet.”
The sources noted that while the Fed’s liquidity offerings would be expanded in accordance with banking law, which stipulates that it must be “broad-based” and not intended to benefit a specific bank, they also warned that the modification could ” be performed in a manner” that ensures the benefits of First Republic Bank.
Related: Burn First Republic and Credit Suisse
It was reported that despite First Republic facing structural challenges with its balance sheet, “the bank’s deposits are stabilizing” and it is not at risk of experiencing “the kind of sudden and severe run” that led regulators to shut down Silicon Valley. Bank. He pointed:
“It has cash to meet customer needs while exploring solutions, the people said. That includes $30 billion deposited by the nation’s largest banks this month.”
This comes after the Fed announced a plan on March 19 to bolster liquidity conditions through “swapping lines,” an agreement between two central banks to exchange currencies.
Coordinated action by the central bank to improve the provision of liquidity in US dollars: https://t.co/Qs4cYY8BFO
— Federal Reserve (@federalreserve) March 19, 2023
“To improve the effectiveness of swap lines in providing US dollar funding, central banks that currently offer US dollar trading have agreed to increase the frequency of seven-day trading from weekly to daily,” the Fed said in a statement. release.
The network of swap lines involving the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss International Bank, began on March 20 and will run until at least April 30.
