There will be no escape and bankruptcy! The leading banks got together and saved the competitor

California-based First Republic Bank has been under pressure, particularly due to the collapse of its competitors. In recent days, the eighteenth largest US bank, Silicon Valley Bank, or the financial institution Signature Bank, has gone bankrupt.

Therefore, the First Republic banks have now decided to lend a hand to the large US banks that do not want to let them fail. They include, for example, Bank of America, Wells Fargo, Citigroup or JPMorgan Chase. This was reported by Reuters.

The leading American financial institutions wanted to express their confidence in the resilience of the banking sector and in this particular banking company with this step. Given history, this is a relatively unprecedented move, as financial assistance is usually provided by the central bank or state authorities.

Prominent American politicians also helped create the American Convention across the banking sector, including Treasury Secretary Janet Yellen, or Federal Reserve Chairman Jerome Powell.

First Republic’s financial injection in California comes at a time when the Swiss central bank has done something similar with Credit Suisse.

According to analysts, the governments of many countries around the world are struggling to deal with the current systemic risks. However, they fear that the risk of a broader banking crisis in the current situation is far from over.

Banks decided to keep the First California Republic alive in their own interests. They want to stop bank runs. “But gradually they will start taking money out of it,” analyst Mathan Somasundaram of research firm Deep Data Analytics told Reuters.

At present, the US authorities are convinced that the banking system there is still in a relatively good condition and maintain that the current situation is very different from what it was like in the US fifteen years ago. According to the authorities, banks are much better capitalized, and some analysts confirm these opinions.

I don’t think we are in the middle of a global financial crisis. Banks’ balance sheets are much better than they were in 2008. Banks and their activities are well organized. “But clients still fear that the potential risk of this financial contagion spreading is real, and that shakes confidence in the system,” analyst Karen Goritsma told Reuters.

Attention is now largely focused on the decision of the US Federal Reserve, whose representatives will decide on a possible increase in interest rates. At the same time, the European Central Bank has already decided on this step and raised interest rates by fifty basis points, saying that banks in the eurozone are in good shape.