First Republic Bank Faces Limit On Fed Borrowing, Loses More Than 25% Of Market Cap In Session

Zinger Key Points
  • If the bank is downgraded by FDIC, its ability to draw liquidity from the Fed will be jeopardized.
  • First Republic is struggling to sell loans and assets in order to stay afloat.

First Republic Bank FRC is facing a potential FDIC downgrade that would limit the bank's ability to borrow from the Federal Reserve.

The U.S. bank regulator may lower its private assessment of First Republic Bank, including its so-called Camel rating, which measures a bank's strength in terms of capital adequacy, asset quality, management, earnings and liquidity. 

This move could lead First Republic to face potential curbs on borrowing from the Federal Reserve, Bloomberg reported Wednesday.

The FDIC has not made a judgment yet, and it appears to be giving the bank more time to come to a private arrangement to shore up its finances, the report said. 

Read now: First Republic Bank Stock Ratings, Upgrades, Downgrades, Initiations

CNBC reported earlier on Wednesday the U.S. government was unlikely to intervene in the struggling bank. 

First Republic has offered to sell the loans or assets at prices above market rates to the 11 big banks that gave help in March in order to secure its survival, according to a Wall Street Journal report. 

Shares of First Republic experienced another extremely volatile session Wednesday, dropping to as low as $5.40. Before the start of the banking crisis in March, the stock traded at $120 per share. 
Chart: First Republic Bank's April 26. Intraday Price Action

Photo via Shutterstock.

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