Yes, a group of large banks provided $30 billion in funding in mid-March to help stabilize First Republic in the aftermath of the Silicon Valley Bank failure. When Silicon Valley Bank sought to shore up its balance sheet by selling bonds - at a loss - it spooked depositors, who then withdrew even more funds.įederal Reserve raises interest rates amid concerns over banking system 05:48 Didn't big banks already pour money into First Republic? Those higher rates have made it more expensive for startups and other businesses to borrow money, which meant many of them were burning through their cash deposits and withdrawing money at faster rates. Silicon Valley, Signature Bank and First Republic failed partly due to their unusual reliance on wealthy individuals and companies, including unprofitable startups, combined with the Federal Reserve's series of interest rate hikes. Regulators assumed control of First Republic one week after the bank's executives revealed that customers had withdrawn more than $100 billion during a panic last month.
Such banks are more vulnerable to bank runs because nervous depositors are prone to withdraw their assets at the first sign of trouble.
Like Silicon Valley Bank, a significant share of First Republic's deposits were uninsured because they exceeded the $250,000 insurance protection that is offered by the FDIC.
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