After regulators unusual moves Sunday evening to guarantee all deposits in the collapsed Silicon Valley Bank and Signature Bank and to provide additional capital to other distressed institutions, First Republic Bank was at the forefront of a Monday fall in bank shares. After falling 33% the previous week, First Republic shares in San Francisco dropped 61.8% on Monday.
The declines occurred despite the Federal Reserve's announcement on Sunday that it had established a new Bank Term Financing Program, which will provide banks with loans for up to a year in exchange for Treasuries or other high-quality collateral. Also, the central bank loosened restrictions on its discount window. First Republic said on Sunday that the Federal Reserve and JPMorgan Bank had provided it with extra liquidity. In addition to any money it would receive from the new Fed facility, the bank said that the move increases its unused liquidity to $70 billion.
Businesses and wealthy individuals make up First Republic's clientele, and many of them were no longer willing to put their money in low-yield accounts when there were other high-interest options available.
Investors are now fearful of unrealized losses that have accumulated at banks since a deposit boom during the pandemic that prompted many to take sizable bets in bonds have now subsequently fallen in value due to the Fed raising interest rates.
“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” said founder Jim Herbert and CEO Mike Roffler in a statement.
Among the top banks, JPMorgan increased 1%, while Citigroup and Morgan Stanley declined by around 1.5%. About 2% was lost by Bank of America and Wells Fargo.
Written by: Massimo Scaccia