June 1, 2023

Wall Street leaders and US officials discussing an intervention at First Republic Bank are exploring government support to encourage a deal that will strengthen the lender, people familiar with the situation say.

The group has proposed a series of measures to make the company more attractive to potential investors or buyers, part of an effort to head off yet another potential U.S. bank failure, said the people, who asked not to be named when describing the confidential talks.

Among the options, the government could play a role in the removal of assets from the First Republic, which undermined its balance sheet. Although investors expressed an interest in helping out, the firm’s unrealized losses were a sticking point. Additional ideas include liability protection, more flexible application of capital rules, or loosening restrictions on ownership shares, people say.

Negotiations are ongoing. Many issues remain unresolved and an agreement is not guaranteed, people say. It is not clear how the government will provide any financial support.

A White House spokesman referred questions to banking regulators. Representatives from the Federal Reserve, the Treasury Department and the First Republic declined to comment, and the FDIC did not respond to requests for comment.

First Republic, a San Francisco-based lender known for catering to wealthy technology executives, has lost more than 80% of its market value this year as clients withdrew their money, forcing the bank to sell assets that have fallen in value amid interest rates. raising rates. A move by 11 stronger banks to bolster the firm with a $30 billion investment last week has earned companies and consultants including JPMorgan Chase & Co. More time to find a way to solve problems.

The Federal Deposit Insurance Corporation has already acquired Silicon Valley Bank SVB Financial Group and New York-based Signature Bank, prompting regulators to take the unusual step of covering uninsured deposits after bank failures.

Treasury Secretary Janet Yellen said earlier Tuesday that the US could take additional emergency measures if other small creditors were at risk. The government is “strongly committed” to reducing financial stability risks where necessary, she said: “Society must have confidence in our banking system.”

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