First Republic: Why the banking crisis is revived

By | May 1, 2023

HE banking crisis in USA he came back with his case Bank of the First Republic (FRB)who is faithful Copy of your case Silicon Valley Bank (SVB).

He had to lose his stock price. BRF-98% in 12 months and be found from the $171.09 in $3.51the “shorts” to win more than $1 billion betting on the collapse of the bank to appear the federal bank deposit insurance authority FDIC (Federal Deposit Insurance Corporation) and start looking once again for the white knight, who save the concept of banking trustbuying what’s left of First Republic Bank.

First Republic Bank stock 52 week chart

He Causes his collapse of the fourth regional US bank in line, included in the special management status of the FDIC, are known to all and are now described in detail in the Fed reports.

HE first essential cause is relaxation of regulations and settings that govern the US banking system, which were implemented during the presidency of Donald Trump.

HE second cause she was adoption one untenable developmental model, which was based on providing extremely low interest loans to FRB depositors. Therefore, it made loans for the purchase of homes at interest rates of 3% when the Federal Reserve rate has reached 5%.

HE third cause she was special offer services management property and briefcase to depositors and its borrowers, which at first seemed like an innovative idea that especially appealed to Wall Street investors, until it turned out to be disastrous.

And the fourth cause she was offender operation of internal departments control and Management danger from the bank itself.

Inside First trimester Q1 of 2023, First Republic Bank, saw that deposits are removed which exceeded $70 billion and which were directed to other banks with higher yields on deposits. HE rhythm of withdrawals He got increase exponentially following the collapse of Silicon Valley Bank on March 9, 2023.

Rather, they themselves depositors remained as borrowers on the bench, enjoying them low interest their loans. At the same time, the bond portfolio held by the FRB had lost much of its value due to the Fed’s interest rate hike. administrators of the bonus briefcase they had not hedged the risk of rising interest rates and falling bond valuations in secondary debt markets.

Does this story remind you of anything? But of course your case Silicon Valley Bank.

with only difference, the customer base of the two banks. HE BLS He got customers Venture Capitals and Start Ups, while the FRB wealthy private individuals. there is one more difference, which refers to the size of the problem. The noun bankruptcy The FRB’s is the second largest in US commercial banking history. The largest was Washington Mutual Bank (WaMu) in September 2008, with WaMu holding $328 billion in assets.

The assets of the FRB amount to $233 billion, at this point it should be noted that the FRB already had received from the beginning of 2023 in addition liquidity height $30 billion by a consortium of 11 US banks, in an attempt to avoid fate.

As of this writing, as candidates white knights for First Republic Bank, the Bank of Americahe JPMorgan and the PNC finances of Pittsburgh. He problem It is not whether saviors will be found, which they almost always are, if we remember that JPMorgan had bought Bear Stearns in March 2008 and Washington Mutual in September 2008 and Bank of America Merrill Lynch in the same month.

He problem is treatment of generators of the causes that lead to problematic states, American banks. And these causes are related to legislativeregulatory and supervisory frame of the US regional banking system and with the banks’ internal control and risk management function.

He look of the stock exchanges analysts is driven to the bottom study of deposits the rest and other regional banksthat may have been affected or be affected in it future the worsening of the banking crisis, the climate of concern and the decline in confidence.

Specially in case where he fed require extras capital or additional injections of liquidity, from banks with insufficient capital and lax risk management. For now, analysts are focusing their attention on balance sheets from KeyCorp, East West Bancorp and Bank OZK, which for the first quarter were in satisfactory condition.

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