Explained: What is First Republic Bank crisis and how it worsens US banking woes

First Republic Bank Crisis: Before the US market could recover completely from the collapse of Silicon Valley Bank and Signature Bank crisis, another major bank in the USA — First Republic Bank's stock lost half its value on Tuesday, April 25, after a disappointing quarterly earnings report. The bank has witnessed seizures of a number of midsized lenders this year that further worsened its condition. 

The California-based lender’s stock price dropped by over 90 per cent this year after the customers withdrew $100bn of deposits during last month’s turmoil led by Silicon Valley Bank’s collapse. First Republic said on Monday that it was considering “strategic options” as it announced the firing of up to 25 percent of its workforce.

As per the S&P 500 report, the bank was the worst performer since the beginning of the year, after the investors sold off most of their shares. However, on April 24, the bank mentioned in its statement that it was exploring strategic options following its disclosure that it lost around $100 billion in deposits. However, this hasn’t restored the lost confidence among investors.

Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell urged investors not to panic, stating they will support the banking system, reported Reuters.

In the first quarter, First Republic had borrowed $92 billion, mostly from the Federal Reserve and some other government-backed lending groups. Later, it effectively replaced lost deposits with loans. First Republic also received a temporary $30 billion in March from big banks like JP Morgan Chase.

"We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients," First Republic mentioned in a statement.

U.S. officials are coordinating urgent talks to rescue First Republic Bank as private-sector efforts led by the bank's advisers have yet to reach a deal, according to three sources familiar with the situation, reported Reuters. 

Also Read: The Tale of Two Crises: From Lehman Brothers fiasco to Credit Suisse collapse

Also Read: Silicon Valley Bank collapse: Indian Banks are ‘not at risk’ from SVB contagion, say experts - here’s why