‘Investors more optimistic’ after billion deposit to First Republic Bank

- Advertisement -spot_imgspot_img
‘Investors more optimistic’ after billion deposit to First Republic Bank

Investors seem to have calmed down now that eleven major American banks have together transferred USD 30 billion to the First Republic Bank. Banks showed recovery on the Asian stock exchanges and financial companies also recovered on the AEX. “There seems to be some optimism again, for now,” says America correspondent Lennart Zandbergen.

The First Republic Bank has a lot of uninsured assets, just like the Silicon Valley Bank that collapsed last week. That also makes investors wary of this bank, says Zandbergen. ‘You saw that investors were looking at which banks are most similar to the SVB. That was First Republic.”

Last night, eleven major American banks collectively transferred USD 30 billion (converted to more than EUR 28 billion) to the First Republic Bank. (Levine-Roberts/Sipa USA)

According to Zandbergen, however, the differences between the two banks are large. ‘First Republic is active in many more different sectors. The Silicon Valley Bank really only had start-ups as clients. They were all in the same economic cycle. ‘

Nevertheless, both banks faced the same problems, says Zandbergen. ‘Account holders withdrew their money, investors lost confidence. That’s not good for a bank.’

He also sees parallels with the unrest that the Swiss bank Credit Suisse caused among investors. “Everyone got stressed about that couch. At some point, that stress disappears from the market and investors become more optimistic. Of course, the question always remains when exactly that will happen.

Windfall for Biden

The US Treasury Department spoke of a “very welcome statement of support” yesterday afternoon, according to CNN. According to the ministry, it shows “the resilience of the banking system”.

The support campaign was probably coordinated by the US government. According to the Bloomberg news agency, the CEO of one of the eleven banks had a conversation about First Republic with Janet Yellen, the US Treasury Secretary, on Thursday.

Biden can now point to the banks taking their responsibility

Lennart Zandbergen, American financial correspondent

For President Joe Biden, this rescue operation is a stroke of luck, says Zandbergen. “Biden especially wants to emphasize that the taxpayer will not pay for the problems at banks. Now he can point to the banks that are taking their responsibility.’

Research

The Federal Reserve will investigate whether its own supervision of the banking system was adequate following the fall of the Silicon Valley Bank. The results of that study are expected in May. ‘It seems that there will be stricter rules for the somewhat smaller banks,’ says Zandbergen.

Meanwhile, the Fed also faces the dilemma of whether or not to raise interest rates after all the turmoil in the financial markets. Zandbergen: ‘The ECB has already made a good start by doing just that. It’s the Fed’s turn next week and investors are assuming that the brakes will be applied there.’


- Advertisement -spot_imgspot_img
Latest news
- Advertisement -spot_img
Related news
- Advertisement -spot_img