First Republic Bank Receives $30 Billion in Deposits from Eleven Banks

Picture: WSJ

To halt the spread of panic after two recent bank failures, the major US banks came to the rescue of First Republic Bank with a massive cash infusion of $30 billion. The bank's executives collaborated in recent days to devise the plan, discussing it with regulatory officials, including Treasury Secretary Janet Yellen.

The contribution of $5 billion each from JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., and Wells Fargo & Co. is an uninsured deposit into First Republic, as confirmed in a statement by the banks. Morgan Stanley and Goldman Sachs Group Inc. are contributing $2.5 billion each, and five other banks are contributing $1 billion each.

The Treasury Department, Federal Reserve, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency applauded the show of support, saying that it demonstrated the resilience of the banking system. Following the collapse of Silicon Valley Bank and Signature Bank, midsize lenders, including First Republic, had been depositing billions of dollars into the big banks, and now, the banks are effectively returning some of that money.

According to insiders, the $30 billion deposits made by the big banks into First Republic Bank do not come with any special deals and earn the same interest rates as those offered to the bank's other depositors. The massive infusion of cash could alleviate the bank's immediate concerns of declining stock prices and depositors withdrawing their funds. However, the bank will still face challenges in a tougher business environment of rising interest rates and more cautious depositors.

In an attempt to calm the nerves of jittery depositors, Treasury Secretary Janet Yellen gave congressional testimony on Thursday, assuring Americans that their deposits would remain secure. The effort to get the funds to First Republic began with a conversation between Yellen and JPMorgan CEO Jamie Dimon on Tuesday, according to a source familiar with the matter.