DEVELOPING: A group of financial institutions has agreed to deposit $30 billion in San Francisco-based First Republic in what's meant to be a sign of confidence in the banking system, the banks announced.
On Thursday, the bank said that it had about $34 billion in cash, not counting the new $30 billion in deposits. First Republic had borrowed tens of billions of dollars from the Federal Reserve and the Federal Home Loan Bank over the past week but daily deposit outflows have now"slowed considerably," the bank said.
"This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system," The Federal Reserve, Treasury Department, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency said in a joint statement. In the great financial crisis, several struggling banks were bought for cheap by the larger firms in an effort to help calm the banking system. However, the unrealized losses on First Republic's bond portfolio due to last year's rapid rise in interest rates have made an acquisition unappealing, the sources said.
The markdown, which would involve the bank's held-to-maturity bond portfolio, would amount to about a $25 billion hole on First Republic's balance sheet, sources told Faber. First Republic typically caters to high-end clients and firms, and its business includes wealth management and residential real estate loans. The company reported more than $212 billion assets at the end of December and generated more than $1.6 billion in net income last year.
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