White House says it is monitoring First Republic Bank situation

The US banking system is sound and resilient after action was taken last month to protect depositors at SVB and Signature Bank, official says

First Republic said its deposits fell to about $104.5 billion in the first quarter of this year. Reuters
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The White House is continuing to monitor the situation at First Republic Bank, following its disclosure this week that it had lost more than $100 billion of deposits in the first quarter of the year that caused its share price to plummet.

The Financial Stability Oversight Council, Treasury Secretary Janet Yellen and Federal Reserve chairman Jerome Powell agreed that the US banking system is “sound and resilient” after “decisive and forceful” actions were taken last month to protect depositors after the collapse of Silicon Valley Bank and Signature Bank, White House spokeswoman Karine Jean-Pierre told reporters on Thursday, when asked about growing market worries about First Republic.

“We took decisive and forceful actions to give Americans confidence that their deposits are safe and to give banks access to liquidity,” she said.

“Since our administration took those actions, we have seen deposits stabilise at regional banks. We have used important tools to quickly stabilise the banking system. We could use those tools again if needed.”

On Monday, San Francisco-based First Republic said it was taking steps to shore up its balance sheet and cut its workforce after deposits fell to about $104.5 billion in the first quarter of this year from $176 billion in the fourth quarter of 2022 despite it receiving $30 billion from Bank of America, Citigroup, JP Morgan Chase and Wells Fargo.

Without the cash provided by America’s largest banks, First Republic’s decline in deposits would have been almost $102 billion during the March banking crisis.

As of March 9, just before the collapse of Silicon Valley Bank that led to a banking crisis in the US, First Republic’s total deposits were $173.5 billion, 1.7 per cent less than what they were at the end of 2022.

First Republic said it began to experience unprecedented deposit outflows on March 10, but things began to stabilise after it received the $30 billion on March 16.

The unsecured deposits from the banks allowed First Republic to reduce its short-term borrowings and total deposits were $102.7 billion as of April 21.

On Thursday, the Financial Times reported that First Republic Bank’s advisers, which include JP Morgan, are working on a private sector solution to keep the embattled lender from being seized and shut down by the Federal Deposit Insurance Corporation.

Earlier in the week, Bloomberg reported that First Republic is considering the sale of $50 billion to $100 billion of assets, which include long-dated mortgages and securities, in an attempt to avoid a similar fate to Silicon Valley Bank and Signature Bank, which collapsed last month and sparked a banking crisis at medium-sized lenders in the US.

Shares of First Republic closed up nearly 9 per cent to $6.19 at the end of trading on Thursday, but they are down 95 per cent since the start of this year.

Asked to explain the Biden administration’s views on whether to protect depositors in First Republic, as it did in the cases of SVB and Signature, Ms Jean-Pierre said: “We have proven how we have moved really quickly in … taking decisive and forceful actions in the past, and I could assure you that you’ll see that again from this administration.”

Updated: April 28, 2023, 6:52 AM