First Republic Bank wobbled, waiting for its collapse.
First Republic Bank faces the possibility of collapse after Silvergate and Signature Bank’s bankruptcy, with limited options to turn their business around. Customers withdrew over $100 billion from the bank in just a month, causing widespread fear across the US. This warns that FRC may become the third-largest bank to bankrupt this year. The bank’s deposit ratio not covered by insurance, higher than its competitors, has dropped from 68% to 27%, excluding $30 billion in deposits from large banks. The bank’s stock also dropped by up to 50%.
SCOOP (1/2): Bankers working w @firstrepublic bank say they expect eventual govt receivership for the ailing bank after it exhausts private sector solutions such as asset sales and finding a buyer, both of which appear difficult. Officials at the big banks believed the Feds were
— Charles Gasparino (@CGasparino) April 25, 2023
Recent financial reports indicate that First Republic Bank is trying to sell debt instruments worth $50 billion to $100 billion as part of its “strategic options” to resolve massive capital outflows. However, the White House remains concerned about whether they can find a way out of insolvency. The Financial Times notes that officials from the Biden Administration, the Federal Reserve, and the Treasury Department have met with the bank’s top executives in recent days.
Moreover, the government is taking over the bank through the “receivership” process – similar to private-sector bankruptcy – after the bank has exhausted all alternative solutions, including selling assets and finding buyers. Officials at major banks believe the Fed is ready to take over FRC as soon as the bank releases its revenue report.
First Republic Bank is one of the leading reputable and high-quality banks in California, USA, serving mainly wealthy and powerful customers, including Meta Platforms CEO Mark Zuckerberg. The bank provides premium products and services such as home loans, high-interest savings accounts, and financial investment advice from highly specialized experts.
If First Republic Bank goes bankrupt like SVB or Signature Bank, depositors may not recover all their money. This is because most of the bank’s deposits are not insured like SVB and Signature Bank. This means that many deposits at First Republic Bank exceed the $250,000 limit set by the US Federal Deposit Insurance Corporation (FDIC).
FRC Securities Fall While Bitcoin Price Fluctuates Unpredictably
The price of Bitcoin (BTC) spiked more than 3% in the last 24 hours as fears were sparked of another possible imminent bank failure as First Republic Bank (FRC) shares closed down more than 50% on April 25.
According to the head of research at Australian crypto education platform Collective Shift, the price of Bitcoin rallied immediately following Fox News Business reporter Charles Gasperino breaking the news that bankers working with First Republic Bank expect the institution to go into government receivership.
Price was $27,500 at the time of the tweet and is now $28,150. pic.twitter.com/aSjzFXiip6
— Matt Willemsen (@matt_willemsen) April 25, 2023
Receivership is a tactic allowing creditors to recover funds that are experiencing a potential default and assists troubled firms in avoiding bankruptcy.
Data from crypto analytics firm Santiment suggested that the correlation between Bitcoin and the S&P 500 may be dwindling as the narrative that Bitcoin is a safe haven amid the banking crisis again gathered steam.
The correlation coefficient indicator shows that Bitcoin’s correlation with the stock market has dropped since the start of April, while its correlation with gold has gotten stronger.
Bitcoin’s price rise is also attributable to the prospect of fresh liquidity injections into the market from the Federal Reserve or other institutions in the wake of uncertainty around First Republic Bank.
Benjamin, the co-founder of crypto analytics firm Jarvis Labs, told Decrypt that, there is, “certainly buying interest on BTC whenever banking issues pop up. But that does not have to be a translation of liquidity actually coming into the market in this instance, but more due to anticipation that it will.”