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First Republic rescue may rely on US backing to reach a deal

Tan KW
Publish date: Thu, 23 Mar 2023, 08:26 AM
Tan KW
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NEW YORK: Wall Street leaders and US officials discussing an intervention at First Republic Bank are exploring the possibility of government backing to encourage a deal that would shore up the lender, people with knowledge of the situation say.

The shares plummeted in post-market trading.

The group has floated a variety of measures to make the company more attractive to potential investors or a buyer, part of an effort to ensure there isn’t another US bank failure, the people said, asking not to be named describing confidential talks.

Among options, the government could play a role in lifting assets out of First Republic that have eroded its balance sheet.

While investors have expressed interest in helping, the firm’s unrealised losses have been a sticking point.

Additional ideas have included offering liability protection, applying capital rules more flexibly or easing limits on ownership stakes, the people said.

The talks are continuing. A variety of issues remain unresolved and an agreement isn’t guaranteed, the people said.

It’s unclear how the government would provide any financial support.

A White House spokesperson referred questions to banking regulators.

Representatives for the Federal Reserve, Treasury Department and First Republic declined to comment, and the Federal Deposit Insurance Corp didn’t respond to requests for comment.

The shares sank in extended New York trading, falling as much as 19% to US$12.80 . They ended regular trading at US$15.77 .

First Republic, a San Francisco-based lender known for catering to wealthy tech executives, has lost 89% of its stock market value this year as customers pulled their money, pressuring the bank to sell assets that had declined in value amid interest-rate hikes.

 - Bloomberg

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