Several large and medium-sized US banks have announced a joint effort to provide up to $30 billion in deposits for First Republic Bank. The initiative is led by some of the biggest banks, including J.P. Morgan, Bank of America, Wells Fargo, and Citibank, each contributing $5 billion. Goldman Sachs and Morgan Stanley are each providing $2.5 billion, while Truist, PNC, U.S. Bancorp, MT, and Capital One are each contributing $1 billion.
The Federal Reserve has stated that it stands ready to provide liquidity through the discount window to all eligible institutions. This implies that the deposit infusion into First Republic takes money out of the contributing banks. If these banks now lack increased deposits to meet their needs, the Fed will open up the discount window and provide them with necessary funds.
This week, withdrawals from Silicon Valley Bank, Signature Bank and even First Republic itself have had to be redirected. Major banks, such as J.P. Morgan, have benefited from the outflows from those banks. So although the Fed is opening up the discount window, the banks may already have the funds they need.
The collaborative effort to transfer deposits from banks like J.P. Morgan to First Republic Bank is intended to show solidarity and to mitigate any potential threat of a bank run. The hope is that this move will help stabilize the banking system in the process.
First Republic Bank traded as low as $19.80 today but is trading about $34.11 currently. The high price reached $40 today
