A group of large US banks on Thursday injected $30 billion into First Republic Bank, a small regional financial institution that was considered at risk of bankruptcy.
The measure came at a time when US authorities are trying to assuage concerns about the health of the country’s banking system, following the collapse of two banks.
Concern about the financial sector has spread globally, raising fears about a possible crisis.
US officials welcomed the decision by the big banks, whose officials said it was a reflection of their “confidence.”
They stated that the banking system has a lot of cash and has generated great profits.
“Recent events have done nothing to change this,” they said.
News about the aid plan implemented by 11 banks, led by JP Morgan and Citigroup, buoyed financial markets and boosted First Republic shares, which at one point rose more than 20%, prompting it to be delisted.
That bank’s shares had lost nearly 70% over the past week.
“This show of support from a group of large banks is very welcome and demonstrates the resilience of the banking system,” financial authorities said.
The main stock markets in Europe also rose after the Swiss National Bank announced that it will provide $54 billion in emergency funds to Credit Suisse, a financial giant that appears to be in a vulnerable situation.
Its shares recovered more than 15% this Thursday, after suffering big falls on Wednesday.
Difficulties in the US banking sector arose last week when Silicon Valley Bank (SVB) collapsed, causing the biggest bankruptcy of a US financial institution since 2008.
Two days later, Signature Bank of New York failed.
The US authorities intervened to guarantee customer deposits beyond the established limits with the intention of sending a strong message to avoid possible runs on some other bank.
In an appearance before the Senate Finance Committee in Washington, the US Treasury Secretary, Janet Yellen, said that savers should have confidence in the system, although she recognized the seriousness of what happened.
“We felt there was a serious risk of contagion that could have led to runs on many banks,” he said, adding that from his point of view “the banking system in general is safe and sound.”
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