A group of large US banks injected $30 billion on Thursday into First Republic Bank, a small regional financial institution that was considered at risk of bankruptcy.
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The measure was carried out at a time when the US authorities are trying to calm concerns about the health of the country’s banking system, after the collapse of two banks, including Silicon Valley Bank (SVB), whose deposits were guaranteed by the government. federal last weekend.
Concern about the financial sector has spread globally, raising fears about a possible global banking crisis.
US officials welcomed the decision by the big banks, whose officials said it was a reflection of their “confidence.”
They stated that the banking system has a lot of cash and has generated great profits. “Recent events have done nothing to change this,” they said.
News about the relief plan implemented by 11 banks, led by JP Morgan and Citigroup, buoyed financial markets and lifted shares of the First Republic, which at one point rose more than 20%, prompting it to be delisted.
That bank’s shares had lost nearly 70% over the past week.
“This show of support from a group of large banks is very welcome and demonstrates the resilience of the banking system,” financial authorities said.
According to the Washington Post, this intervention is, according to analysts, one of the most radical movements in the modern history of US banking, and reflects the degree of concern among senior federal officials and Wall Street executives about industry stability.
The main stock markets in Europe also rose after the Swiss National Bank announced that it will provide $54 billion in emergency funds to Credit Suisse, a financial giant that appears to be in a vulnerable situation.
Its shares recovered more than 15% this Thursday, after suffering big falls on Wednesday.
Risk of contagion
Difficulties in the US banking sector arose last week when the SVB collapsed, causing the biggest bankruptcy of a US financial institution since 2008.
Two days later, Signature Bank of New York failed.
The US authorities intervened to guarantee customer deposits beyond the established limits with the intention of sending a strong message to avoid possible runs on some other bank.
In an appearance before the Senate Finance Committee in Washington, the US Treasury Secretary, Janet Yellen, said that savers should have confidence in the system, although she recognized the seriousness of what happened.
“We felt there was a serious risk of contagion that could have led to runs on many banks,” he said, adding that from his point of view “the banking system in general is safe and sound.“