The regional financial institution was eager to ship a reassuring message to buyers and purchasers, as hypothesis about contagion from the collapse of Silicon Valley Bank is rife.
Reassuring within the face of panic, hypothesis and rumors: that is the train that First Republic Bank, one of many banks about which the craziest rumors have been circulating because the collapse of Silicon Valley Bank on Mar. 10, has simply undertaken.
First Republic Bank shares closed down virtually 15% in the course of the Friday Mar. 10 buying and selling session. It is feared that this fall will proceed when the markets reopen on Mar. 13, if the regulators don’t put out the hearth across the banking sector, lit by SVB.
“In light of recent industry events, the last few days have caused uncertainty in the financial markets,” wrote in a letter to purchasers Jim Herbert, Founder and Executive Chairman, and Mike Roffler, CEO and President. “We want to take a moment to reinforce the safety and stability of First Republic, reflected in the continued strength of our capital, liquidity and operations.”
‘Our Capital Remains Strong’
“Our capital remains strong. Our capital levels are significantly higher than the regulatory requirements for being considered well-capitalized. Our liquidity remains strong.”
They added that the financial institution has a “well-diversified deposit base” and continues to have entry to “over $60 billion of available, unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank.”
“We are here to fully serve you. We stand ready to process transactions and wires, fund loans, answer questions and serve your overall financial needs – as we do every day,” Herbert and Roffler mentioned.
You can learn their letter in full right here.
The query is whether or not these phrases will probably be sufficient to reassure nervous buyers and purchasers.
On social networks, pictures, supposedly exhibiting lengthy queues in entrance of First Republic Bank areas in California, had been broadly shared and commented on.
TheRoad can not independently confirm the authenticity of those movies.
First Republic Bank didn’t reply to a request for remark.
‘Trust within the System May Have Dissipated’
“One major thread we’ve been following has been the contagion from SVB potentially spreading to other banks,” mentioned Odeon Capital Group LLC analyst, Dick Bove. “Reduction in bank deposits and the sharp negative reaction in the financial markets to the SVB developments suggest a deeper discontent with the banking industry’s treatment of their clients and investors.”
The analyst added: “Trust within the system might have dissipated, meaningfully.”
Regulators are in a race against time to find cash for SVB depositors and avoid a worsening of the crisis.
In addition to First Republic Bank (FRC) – Get Free Report, rumors and speculation are also circulating about Signature Bank (SBNY) – Get Free Report, whose share price fell by 22.87% during the last trading session.
SVB’s failure, which is the second-largest of a bank in U.S. history, has shaken many investors. It was the result of a bank run, caused by the firm’s announcement that it planned to raise $2.25 billion by issuing new common and convertible preferred shares to shore up its finances, after it sold bonds in its portfolio of investments at a $1.8 billion loss.
About $42 billion of deposits were withdrawn by the end of Mar. 9, according to a regulatory filing. By the close of business that day, SVB had a negative cash balance of $958 million.
SVB was the go-to lender for many tech companies and venture capital firms. It played an important role in the startup ecosystem, by providing specialized financial services, industry expertise, a valuable network, and a strong reputation.
One of the concerns is that there is a contagion to regional banks, which also do business with venture capital firms and start-ups. Regulators are considering extraordinary measures to avoid unpleasant surprises.
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve are working on the creation of a fund that would allow regulators to backstop more deposits at banks that run into trouble, following the collapse of SVB, reports Bloomberg News.