Eleven major banks have banded together to provide $30bn (£24.7bn) in cash in an attempt to end a crisis of confidence surrounding another major US lender.
Regional lender First Republic was among the banks whose shares tumbled this week amid an industry-wide balance sheet review sparked by the financial crisis. Silicon Valley Bank (SVB) last Friday.
The handover of bailout funds from peers including JPMorgan, Citigroup, Bank of America and Wells Fargo came hours after Switzerland’s second-largest bank received a 50 billion euro (£44.5 billion) lifeline from the country’s central bank.
Credit Suisse has suffered the same share price hit as First Republic, largely because of concerns that rising interest rates imposed by the central bank to combat inflation will damage its balance sheet.
Unlike last week when the U.S. government effectively reined in SVB, U.S. Treasury Secretary Janet Yellen discussed a bank-led rescue plan with JPMorgan bosses as early as Tuesday, according to Reuters.
Ms Yellen, a former Fed chair, is understood to have helped incubate a performance of support and resilience in the face of renewed banking crisis fears.
The banks involved in the rescue issued a joint statement saying their time-limited deposits demonstrate “their commitment to helping banks serve their customers and communities”.
Silicon Valley Bank – What Happened?
First Republic responded, “This support from America’s largest bank reflects confidence in First Republic and its ability to continue to provide unwavering excellence in service to its customers and community.”
Its shares recovered from record lows earlier in the day to close nearly 10% higher.
The Swiss National Bank’s loan to Credit Suisse helped it jump 19 percent the day after Thursday’s carnage in value.
The bailout news helped broader European shares end higher after investors were initially wary of ECB raises interest rate by 0.5 percentage points.
It prioritized the fight against inflation over market turmoil, a move that sent a clear signal to the public that it was not overly concerned about hitting banks’ confidence crisis.