Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

U.S. Considers Expanding Emergency Lending Facility while Giving First Republic Time to Shore up Balances


Mon 27 Mar 2023 | 01:34 AM
Taarek Refaat

US authorities are considering shoring up the First Republic's balance sheet with emergency loans, seeking to give the bank more time to shore up its balance sheet, according to Bloomberg.

Officials have yet to decide what support they can offer the First Republic, and whether they will do so at all, and expanding the Fed's offer is one of many options under evaluation at this early stage. Regulators are still grappling with the collapse of two other banks - Silicon Valley Bank and Signature - that require more immediate attention.

The source, who asked not to be identified discussing these secret talks, said that even without this step; regulators deem that First Republic is stable enough to operate without any immediate intervention, as the bank and its advisors try to strike a deal to shore up its balance sheet.

First Republic shares have fallen more than 90% this month amid fears that the San Francisco-based bank could fall victim to the same forces that caused the recent collapse of three US banks. While these banks collapsed when customers rushed to withdraw their money, they suffered losses in the value of assets; the First Republic kept working.

US officials continue to closely monitor the bank's health and consolidation progress for any unexpected change in the situation.

Behind the scenes, the sources said, officials have concluded that the bank's deposits are stable, not subject to the kind of sudden and severe stampede that prompted regulators to put Silicon Valley Bank on guard within a few days.

Although the First Republic has structural problems with its balance sheet; it has the cash to meet customers' needs while looking for solutions, Souces told Bloomberg. This includes $30 billion deposited by the country's largest banks this month.

A possible modification to the Federal Reserve's emergency lending program announced on March 13 is among the options that authorities have explored in the past few days, according to people familiar with the deliberations.

Any expansion of the Fed's liquidity offerings would apply to all eligible banks, in line with the Banking Act, which states that remedies must be broad, rather than aimed at helping a particular bank. But the change can be made in a way that ensures the First Republic benefits, sources pointed out.