NEW YORK (Reuters) – Three sources familiar with the matter said U.S. officials had not yet reached a deal because a private-sector effort led by advisers to First Republic Bank (FRC.N) had yet to reach a deal. are coordinating emergency consultations for relief. .
Government agencies such as the Federal Deposit Insurance Corporation (FDIC), the Treasury Department and the Federal Reserve recently began coordinating meetings with financial firms to finalize solutions for troubled lenders, he said. a source said.
The government has been in touch with the First Republic and its advisers for weeks, but the government’s renewed involvement has helped bring more parties to the negotiating table, including banks and private equity firms. added one of the sources.
It is unclear whether the US government is considering joining the First Republic’s private sector rescue. But the government’s involvement encouraged First Republic officials to rush a deal to avoid a takeover by U.S. regulators, one of his sources said.
First Republic became the epicenter of the U.S. regional bank crisis in March after wealthy clients they courted to boost its ferocious growth began withdrawing deposits, shaking banks. .
U.S. officials prefer a private-sector deal to First Republic, according to two of the sources, rather than being under the control of the FDIC.
But many of the proposed options have so far failed to come to an agreement, including the sale of assets and the creation of a “bad bank” to sequester underwater assets, the sources added.
Any resolution must cover the losses that First Republic or any potential buyer of the bank may assume in the event of a transaction. These losses are attributed to First Republic’s outstanding loan balances and bond portfolio, with lower-yielding assets being marked down in light of rising interest rates.
The deal structure most likely to bail out First Republic would be a special purpose entity that splits up some of the lender’s assets for other banks to buy, two sources familiar with the discussion said. Stated.
Banks are reluctant to purchase these assets at market discounts, and First Republic hopes that US officials will persuade the banks to participate or provide some sort of government backstop to the transaction. one of the sources said.
CNBC reported Friday, citing sources, that government talks are now focused on preparing the First Republic to come under FDIC control, and that such an outcome is likely. As trustee, the FDIC Fund will assume losses incurred by taking over First Republic’s underwater assets. The FDIC can then recover those losses from all the banks that contribute to its insurance program without hurting US taxpayers.
The source requested anonymity because the discussion is confidential.
In a statement, First Republic said it was “discussing strategic options with multiple parties as we continue to serve our clients.”
The Treasury Department, Federal Reserve Bank and FDIC declined to comment.
First Republic shares fell 30% to trade at $4.31 on Friday.
Wall Street banks have bolstered Fast Retailing since 11 of the largest U.S. lenders deposited $30 billion in banks on March 16 in a bid to stem the regional banking crisis that led to the failures of Silicon Valley Bank and Signature Bank. I’ve been trying to find a public solution.
Discussions over deals this week took on new urgency after First Republic revealed on Monday that more than $100 billion in deposit outflows occurred in the first quarter. The bank said deposits had stabilized, but said it was losing money because it had to replace withdrawn deposits with interest-bearing funds from the Federal Reserve.
According to one of the sources, First Republic is considering a major blow and even a complete loss to its shareholders as one option to block the takeover by US regulators. First Republic shares have lost 95% of their value since the regional banking crisis began on March 8.
Reporting by Andrea Shalal of Washington and Nupur Anand of New York. Additional reporting by David French. Editing by Lananh Nguyen, Megan Davies and Gerry Doyle
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