First Republic Bank will receive $30 billion in deposits from 11 banks, in an effort to stabilize the lender and boost confidence in the U.S. banking system as a whole.
JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Truist are among the banks giving infusions of $5 billion, $2.5 billion, and $1 billion. In a statement released Thursday, the Treasury Department said their action "is most welcome, and demonstrates the resilience of the banking system."
After Silicon Valley Bank and Signature Bank collapsed, Fitch Ratings and S&P Global Ratings downgraded First Republic Bank's credit rating over worries more depositors would take out their cash, CNN reports. At First Republic, 68 percent of its deposits are uninsured over the $250,000 FDIC limit, and if there was a run on customers trying to leave the bank, First Republic would need to sell assets or borrow money to pay them back their deposits in cash.
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Treasury Secretary Janet Yellen called JPMorgan CEO Jamie Dimon first to discuss the deal, people familiar with the matter told The Washington Post, and then they both reached out to the other banks to get them on board. "They're trying to create a firewall to protect themselves from further angst about the banking systems and continued bank runs," Mark Zandi, an economist at Moody's Analytics, told the Post. "It's about shoring up the weakest links in the banking system and, in doing so, inoculating themselves from the fire getting to them."
Stocks rose once the plan was announced, with First Republic's shares ending the day up more than 10 percent.
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