(Bloomberg) – U.S. authorities are considering expanding an emergency lending facility for banks in a way that would give First Republic Bank more time to shore up its balance sheet, according to people familiar with the situation.
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Officials have yet to decide what support, if any, they might offer to the First Republic, and expanding the Federal Reserve’s bid is one of several options being weighed at this early stage. Regulators continue to wrestle with two other failed lenders – Silicon Valley Bank and Signature Bank – that need immediate attention.
Even close to that move, watchdogs consider First Republic stable enough to operate without immediate action as the company and its advisers try to hammer out a deal to shore up its balance sheet, people said, asking not to be named be used to conduct confidential conversations.
First Republic stock has plummeted more than 90% this month amid fears the San Francisco-based lender could fall victim to the same forces that recently caused the collapse of a trio of U.S. banks. But while those banks collapsed as fast customer withdrawals forced them to record losses on written-off assets, First Republic has remained open and independent.
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US officials have been keeping a close eye on the company’s health and progress – aiming to remain vigilant should the situation unexpectedly change.
Behind the scenes, they have concluded that the bank’s deposits are stabilizing and that it is not vulnerable to the kind of sudden, severe rush that prompted regulators to seize Silicon Valley Bank in a matter of days, the people said .
Though First Republic is experiencing structural issues with its balance sheet, it has cash to meet customer needs while it seeks solutions, the people said. That includes $30 billion deposited this month by the country’s largest banks.
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Officials from the Fed, FDIC and First Republic all declined to comment. The Treasury Department had no immediate comment.
A possible adjustment to the Federal Reserve’s emergency lending program announced on March 13 is among the options that authorities have been weighing in recent days, according to people familiar with the deliberations.
Any expansion of the Fed’s liquidity offerings would apply to all eligible users, in line with the Banking Act, which states that remedial action must be broad in scope and not aimed at helping a specific bank. But the change could be made in a way that benefits the First Republic, people said.
–Assisted by Christopher Condon.
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