First Republic Bank, Other US Lenders Feel the Heat After SVB Collapse
Zhou Ailin
DATE:  Mar 16 2023
/ SOURCE:  Yicai
First Republic Bank, Other US Lenders Feel the Heat After SVB Collapse First Republic Bank, Other US Lenders Feel the Heat After SVB Collapse

(Yicai Global) March 16 -- Small and medium-sized American banks, including First Republic Bank, are still sensing the ripple effects of the collapse of Silicon Valley Bank even though the government ran to its rescue.

A United States-based hedge fund partner told Yicai Global that their withdrawals of USD40,000 and USD400 from First Republic Bank were "paused" for around three days until yesterday. "It used to take just a few seconds."

The California-headquartered private lender has become a target of short sellers. First Republic Bank's stock price [NYSE: FRC] was 3.9 percent up in after-hours trading at 3.32 p.m. after slumping 21.4 percent yesterday. On March 13, the shares dived 67 percent, the largest single-day decline ever. Moreover, shares of PacWest Bancorp [NASDAQ: PACW], linked to troubled Pacific Western Bank, fell around 35 percent that day to trigger a circuit breaker.

The domino effect began from Silicon Valley Bank that announced on March 8 it seeks a USD1.8 billion capital increase, which alarmed depositors of liquidity issues and led them to withdraw their funds and consequently prompted the lender to sell bonds at a loss. In order to mitigate the impact, government agencies guaranteed depositors' funds.

No bank is an island as the impact of the collapse is passed on. "We are going to transfer our money in First Republic Bank to Bank of America which is a big bank and our money is safer there," the above-mentioned fund partner said.

Charlotte-based Bank of America has accepted over USD15 billion in deposits in a few days and become one of the winners from the bankruptcy of Silicon Valley Bank and another two small banks in the US, according to Bloomberg.

However, a source close to Bank of America told Yicai Global that in this situation, such a large sum of deposits does not make the lender happy. Usually, banks can lend each other money via interbank loans but right now financial institutions have poor liquidity so the best bet is US bonds which pose "great uncertainties."

Editor: Emmi Laine, Xiao Yi



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Keywords:   First Republic Bank,Banking Risk