March 17 - A $30 billion lifeline for First Republic Bank eased fears of its imminent collapse but a late tumble in the troubled U.S. lender's shares showed investors were still worried about cracks in the sector.
Large US banks injected the funds into the San Francisco-based bank on Thursday, swooping in to rescue the lender caught up in a widening crisis triggered by the collapse of two other mid-size US lenders over the past week.
DEVELOPMENTS First Republic Bank received $30 billion in deposits from several big banks, the banks said in a statement on Thursday, as part of a rescue package for the lender.
Despite the rescue, First Republic's shares fell 17per cent in extended trading on Thursday, after it said it was suspending its dividend. Its Frankfurt-listed shares rose as much as 5per cent in early trading on Friday.
Banks sought record amounts of emergency liquidity from the Federal Reserve over recent days in the wake of the failure of Silicon Valley Bank and Signature Bank, which in turn helped undo months of central bank efforts to shrink the size of its balance sheet, Fed data showed on Thursday.
US Treasury Secretary Janet Yellen said the U.S. banking system remains sound and Americans can feel confident that their deposits are safe.
Credit Suisse said it was taking "decisive action" to strengthen its liquidity by exercising its option to borrow from the Swiss National Bank up to 50 billion Swiss francs ($54 billion). But its shares resumed their decline on Friday, giving up early gains.
Wall Street bank JPMorgan said that Credit Suisse's takeover by another lender, probably its Swiss rival UBS, was the most likely scenario for the embattled bank but the two banks are opposed to a forced merger, Bloomberg News reported, citing people with knowledge of the matter.
The European Central Bank has convened an unscheduled meeting of its Supervisory Board on Friday to discuss stress and vulnerabilities in the euro zone bank sector.
The ECB's decision to raise interest rates on Thursday signals strong confidence in the solidity of European banks, French ECB policymaker Francois Villeroy de Galhau said.
China's central bank said on Friday it would cut the amount of cash that banks must hold as reserves for the first time this year to release liquidity and support the economy.
Japan's finance ministry, financial regulator and central bank said their officials will meet on Friday to discuss market developments.
MARKETS European stock indexes rose in early trading on Friday, extending a recovery from the previous day as fears about a banking crisis eased slightly after top US authorities and banks took action to rescue First Republic Bank. The US dollar slipped.
Banking worries send US markets on dizzying ride. _Reuters
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