The US investigates more financial assistance, favoring the First Republic
According to anonymous sources, despite banking regulations indicating that remedies should not be designed to favor a specific bank, this adjustment might be framed “to ensure” that First Republic benefits.
According to sources acquainted with the matter, United States regulators reportedly consider “expanding” an emergency loan line for banks, which might offer First Republic Bank more time to resolve balance sheet difficulties.
Bloomberg reported on March 26 that anonymous U.S. government sources said they were considering “expanding the Federal Reserve’s offering” as one possible way to help the First Republic.
According to reports, authorities found the First Republic “stable enough to operate” without the need for “immediate intervention” while the bank works to “shoring up its balance sheet.”
The sources reportedly stated that while the Fed’s liquidity offerings would be expanded by banking laws, which stipulate that it must be “broad-based” and not intended to benefit a specific bank, the change could be “made in a way” that helps First Republic Bank.
Although the First Republic has balance sheet structural issues, “the bank’s deposits are stabilizing,” It is not in danger of “the kind of sudden, severe run” that prompted authorities to shut down Silicon Valley Bank.
This development is unsurprising after an announcement on March 19 to improve liquidity circumstances through “swap lines,” or an arrangement between two central banks to trade currencies.