JPMorgan, Citi, Goldman Sachs, others inject $30 billion to rescue First Republic Bank

On Friday, multi-billion-dollar lifelines for troubled US and European banks shored up investor confidence and bolstered sentiment in battered stocks. Large US banks including JPMorgan Chase, Citigroup, Bank of America Corp, Wells Fargo, Goldman Sachs and Morgan Stanley injected $30 billion in deposits into First Republic Bank on Thursday, rescuing the lender caught up in a widening crisis triggered by the collapse of two other mid-size US lenders over the past week.

This package came less than a day after Swiss bank Credit Suisse clinched an emergency central bank loan of up to $54 billion to shore up its liquidity, which went some way to calming panic about a global banking crisis.

While Asian stocks were mostly higher in morning trade on Friday, concerns still remain about whether a global financial crisis has been fully averted. First Republic Bank's stock closed up 10 per cent on news of the rescue, but its shares fell 18 per cent in after-market trading after the bank said it would suspend its dividend. The stock is down more than 70 per cent since March 6.

Despite the financial markets turmoil, the European Central Bank pressed forward with a 50-basis-point rate hike on Thursday, arguing that eurozone banks were resilient and that the move to higher rates should bolster their margins. The focus now swings to the Federal Reserve's policy decision next week and whether it will stick with its aggressive interest rate hikes as it seeks to get inflation under control.

Singaporean and Australian authorities have reported that they are keeping a close eye on the financial markets, but they remain optimistic that domestic banks are sufficiently capitalized and capable of withstanding significant shocks. Nonetheless, banking shares worldwide have been heavily affected since the failure of Silicon Valley Bank last week, caused by losses related to bonds that accumulated during the interest rate surge last year, prompting concerns about potential hidden risks within the broader banking sector.

Credit Suisse found itself caught up in the market turmoil within a matter of days, resulting in the bank seeking assistance from Switzerland's central bank. This move marked the first time a major global bank had resorted to emergency measures since the 2008 financial crisis, amid concerns of contagion in the banking industry and uncertainty surrounding the ability of central banks to maintain their aggressive rate hikes aimed at curbing inflation.

Although policymakers have been keen to stress that the current situation differs from the global financial crisis of 15 years ago, citing better capitalization of banks and greater availability of funds, recent data indicates that banks in the United States have been seeking record amounts of emergency liquidity from the central bank, leading to an increase in the size of the Fed's balance sheet after months of contraction.

Janet Yellen, the US Treasury Secretary, affirmed that despite the difficulties, the nation's banking system is still robust, primarily due to resolute and potent measures taken after the downfall of Silicon Valley Bank. The rescue effort for First Republic Bank was put together by top power brokers, including Yellen, Federal Reserve Chairman Jerome Powell, and JPMorgan Chase CEO Jamie Dimon, who together discussed the package on Tuesday, according to a source familiar with the situation.

(With Agency inputs)