Officials in the United States are reportedly deliberating about "extending" an emergency line of credit for banks, which may give First Republic Bank some leeway to address balance sheet concerns, according to people familiar with the situation.
In a March 26 Bloomberg report citing unnamed sources, US officials are reportedly mulling what "if any" support can be provided to the First Republic, however an "expansion of the Federal Reserve offer" is a of the options being explored.
Regulators reportedly deemed First Republic "stable enough to operate" without the need for "immediate intervention" as the bank is making efforts in the meantime to "strengthen its balance sheet."
The sources noted that while the Fed's liquidity offerings would be expanded in accordance with banking law, which stipulates that it must be "broad-based" and not intended to benefit a specific bank, they also warned that the disruption could " be done in a mannerโ that ensures the benefits of First Republic Bank.
Related: Burn First Republic and Credit Suisse
It was reported that despite First Republic facing structural challenges with its balance sheet, "the bank's deposits are stabilising" and it is not at risk of experiencing "the kind of sudden and severe run" that led regulators to close the bank of Silicon Valley. He pointed:
โIt has cash to meet customer needs while exploring solutions, the people said. That includes $30 billion deposited by the nation's largest banks this month."
This comes after the The Fed announced a plan on March 19 to strengthen liquidity conditions through "swap lines," which involve an agreement between two central banks to swap currencies.
Coordinated action by the central bank to improve the provision of liquidity in US dollars: https://t.co/Qs4cYY8BFO
โ Federal Reserve (@federalreserve) March 19, 2023
"To improve the effectiveness of swap lines in providing US dollar funding, central banks that currently offer US dollar trading have agreed to increase the frequency of seven-day trading from weekly to daily," the Fed said in a statement. release.
The network of swap lines, which involves the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss International Bank, started on March 20 and will run until at least April 30.
Post navigation
