After two regional banks crumbled,a third U.S. bank could have headed in the same direction. But on Thursday, 11 major banks announced a combined $30 billion in uninsured deposits to keep First Republic Bank afloat.
Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank each will deposit at least $1 billion. Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are making the largest deposits at $5 billion each.
Banks and regulators said the banks’ actions show resiliency in the U.S. banking system.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” a joint statement by federal regulators said.
What led to the collapse of Silicon Valley Bank and others?
Like any other bank, it operated by taking a portion of deposits and creating loans — but this only works if there's enough deposited at once.
The Federal Deposit Insurance Corporation ensures that anyone with up to $250,000 in deposits won’t lose their money if a bank runs out of cash. But larger accounts are not insured.
Federal regulators took control of Silicon Valley Bank and Signature Bank last weekend.
First Republic Bank said insured deposits remained stable in the last week, but daily deposit outflows have “slowed considerably.”
“Following the receiverships of Silicon Valley Bank and Signature Bank, there were outflows of uninsured deposits at a small number of banks. America’s financial system is among the best in the world, and America’s banks – large, midsize and community banks – do an extraordinary job serving the banking needs of their unique customers and communities,” the 11 banks said in a joint statement. "The banking system has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this.
“The actions of America’s largest banks reflect their confidence in the country’s banking system.”
