US Officials Lead Urgent Rescue Talks for the First Republic – Sources

NEW YORK (Reuters) – U.S. officials are coordinating urgent talks to save First Republic Bank, as private sector efforts led by the bank’s advisers have yet to reach an agreement, three sources familiar with the matter said. .

The sources said the Federal Deposit Insurance Corporation (FDIC), the Treasury Department and the Federal Reserve are among the government agencies that in recent days have begun organizing meetings with financial firms about putting together a lifeline for the defaulting lender.

One source added that the government’s participation helps bring more parties, including banks and private equity firms, to the negotiating table.

It is unclear if the US government is considering participating in a private sector bailout of First Republic. One source said the government’s involvement has emboldened First Republic executives as they seek an agreement that would avoid a power grab by US regulators.

The First Republic became the epicenter of a regional banking crisis in the US in March after wealthy clients trying to shore up its rapid growth began withdrawing deposits and left the bank reeling.

The sources asked not to be identified because the discussions are confidential.

“We are engaged in discussions with multiple parties about our strategic options while continuing to serve our customers,” First Republic said in a statement.

The Treasury Department declined to comment. The FDIC and the Federal Reserve did not immediately respond to emailed requests for comment after hours.

Wall Street banks have been trying to find a solution for First Republic since 11 of the largest US lenders deposited $30 billion in the bank on March 16 to stop a regional banking crisis that led to the failure of Silicon Valley and Signature Bank.

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Discussions over the deal gained new urgency this week after First Republic revealed on Monday that deposit outflows were more than $100 billion in the first quarter. Although the bank said its deposits had stabilized, it revealed that it had lost money because it had to replace withdrawn deposits with interest-bearing financing from the Federal Reserve.

Two of the sources said US officials view the private sector deal as preferable to First Republic being placed in FDIC receivership.

The sources added that many of the proposed options – including selling assets or creating a “bad bank” that would isolate its assets underwater – have so far failed to reach a deal.

Any solution must come with coverage for losses that First Republic or the bank’s potential acquirer would incur if there was a deal. These losses will arise from the First Republic’s loan book and fixed income portfolio, which will have lower-yielding assets reduced to account for higher interest rates.

One source said First Republic is considering a major hit, even a complete shareholder loss, as part of options that might prevent a takeover by US regulators. First Republic shares have lost 95% of their value since the regional banking crisis began on March 8.

The sources said no decision has been made about moving forward and no deal is confirmed.

(Reporting by Andrea Shalal in Washington and Nupur Anand in New York; Additional reporting by David French; Editing by Lanan Nguyen, Megan Davies and Jerry Doyle

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