After the fall of Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank (SNBY), First Republic Bank, a commercial bank and provider of wealth management services, is the latest financial institution to receive a bailout. About a dozen lenders have announced they will deposit $30 billion into the embattled bank’s coffers to bolster liquidity. US banks have suffered from the financial contagion that followed last week’s three bank failures. Depositors reportedly withdrew $8.8 billion of Charles Schwab Corporation’s main money market funds.
The impact of recent bank failures on the US banking industry prompts a wave of bailouts
Several banks received bailouts last week due to the collapse of three major US banks. This event rocked the banking industry and banks of all sizes, including giants like Bank of America and JPMorgan, saw their shares plummet. After the failure of Silvergate, SVB and SNBY, the banks borrowed approximately $164.8 billion from the Federal Reserve to ensure liquidity. The collapse has also affected international financial institutions, as Credit Suisse received a 50 billion Swiss franc bailout from the Swiss National Bank following the bailout of SVB and SNBY depositors by the US central bank, the Treasury and the Federal Deposit Insurance Corporation (FDIC).
Bank of the First Republic (NYSE: FRC) experienced a tumultuous week with a 50.41% drop in the value of its shares against the US dollar in the last five days. Although explorer Various options, including a sale, to improve its liquidity During this chaos, the bank founded in 1985 faced the risk of bankruptcy. However, on Thursday, 11 banks, including Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist Bank and US Bank, deposited $30 billion into First Republic Bank ( FRC), saving it from a possible collapse.
He Press release discussing funding, he mentions that after the government bankruptcies of SVB and SNBY, “some banks experienced uninsured deposit outflows.” The statement from the 11 lenders indicates that “the actions of the largest US banks demonstrate their confidence in the country’s banking system.” First Republic Bank (FRC) shares managed to rally on Thursday before the market closed, ending 9.98% higher and earning $3.11 per share. In August 1986, FRC shares were priced at $10 each and on March 16, 2023 they were trading at $34.27 per share.
In addition to the 11 lenders that mentioned uninsured deposit outflows, a recent report by Bloomberg contributor Silla Brush revealed that the Charles Schwab Corporation experienced “net outflows of $8.8 billion from its top money market funds this week.” Bloomberg data suggests it was the highest number of redemptions in six months, with Schwab clients withdrawing funds from a pair of Schwab Value Advantage Money funds.
Investors are also concerned that Pacwest Bancorp could face similar problems, as the financial holding’s shares have fallen 27.16% in the past five days. Several other bank stocks, including shares of Synchrony Financial, CNB Financial, Discover Financial and Capital One, also posted losses last week.
What do you think will be the long-term effects of these bank failures and subsequent bailouts on the US banking industry and the economy in general? In the comment section below, let us know what you think about this topic.
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