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First Republic's Share Price Mauled After Q1 Results

Tom Burroughes

26 April 2023

has agreed to deposit $30 billion in the lender in a bid to prevent a contagion risk effect. Since fetching $115 a share in early March, First Republic’s shares have fallen more than 90 per cent.

An issue is whether the US federal authorities allow First Republic to fail and backstop all, or a portion, of its depositors. The risks revive debates held in 2008 about whether government bailouts/protections for banks create a moral hazard problem, with a decade of almost zero central bank interest rates arguably leading people into a false sense of security. There was controversy about how the Biden administration backstopped all depositors in the failed Silicon Valley Bank in March. (That bank has been bought by First Citizens Bank.)