Big banks create $30bn rescue package for First Republic

"This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system," said the U.S. Treasury Secretary Janet Yellen.

Eleven of the biggest banks in the United States announced a $30 billion rescue package for First Republic Bank on March 17, in an effort to prevent the California-based bank from becoming the third bank to fail in less than a week and head off a broader crisis in the banking sector.

First Republic serves a similar clientele as Silicon Valley Bank, which failed on Friday after depositors withdrew about $40 billion in a matter of hours. It appears that First Republic, which had deposits totalling $176.4 billion as of December 31, was facing similar issues.

Lessons learnt: On the Silicon Valley Bank episode

In a statement, the group of banks confirmed that other unnamed banks had seen large amounts of withdrawals of uninsured deposits, which are those that exceed the $2,50,000 level insured by the Federal Deposit Insurance Corporation. First Republic's shares dropped more than 60% on Monday, even after the bank said it had secured additional funding from JPMorgan and the Federal Reserve.

The rescue package brought back memories of the 2008 financial crisis, when banks collectively came to the aid of weaker banks in the early days of the crisis. Banks then bought each other in hurried deals in order to keep the crisis from spreading further.

The $30 billion in uninsured deposits is seen as a vote of confidence in First Republic, whose banking franchise before the past week was often the envy of the industry. The bank catered to wealthy clients, many of them billionaires, and offered them generous financial terms. The Wall Street Journal reported that Facebook founder Mark Zuckerberg got a mortgage through First Republic.

First Republic shares had been down as much 36% earlier on Thursday, but rallied after reports the rescue package was in the works. The stock closed up 10%.