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The heads of both Silicon Valley Bank and First Republic Bank tried to influence the U.S. government to take a softer regulatory approach to the financial sector in the months prior to last week’s crisis in the financial sector, as lawmakers ask whether recent regulatory easing made bank failures more likely.
On Jan. 23, First Republic CEO Mike Roffler sent a letter to both the Federal Reserve and the Federal Deposit Insurance Company against a proposal to require smaller lenders to follow similar rules as systemically important banks, reports The Information. (U.S. regulators have yet to implement the proposal.)
In his letter, Roffler wrote “such requirements should only be applied to large, interconnected financial institutions whose failure could pose systemic risk to the financial stability of the U.S.”
First Republic Bank did “not pose the same, if any, financial stability risk,” Roffler wrote.
Roffler’s view in January proved incorrect after the collapse of Silicon Valley Bank. Shares in First Republic Bank crashed on Monday, the first day of trading after the Federal Reserve stepped in to protect Silicon Valley Bank’s depositors in full. Then, on Wednesday, both S&P Global Ratings and Fitch Ratings cut First Republic Bank to junk status, citing the risk of deposit outflows and a loss of liquidity.
On Thursday, eleven large banks, including JPMorgan, Citigroup, and Bank of America, agreed to deposit $30 billion into First Republic Bank. The banks pledged to keep the money there for at least 120 days, reports Bloomberg, either saving First Republic Bank or giving it time to pursue other options.
First Republic Bank said the $30 billion cash infusion “reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system” in a statement.
Shares in First Republic Bank fell 17% in after-market trading on Thursday. The bank’s shares are now down around 64% for the week.
First Republic Bank did not immediately respond to a request for comment.
Silicon Valley Bank
Greg Becker, former CEO of the now-collapsed Silicon Valley Bank, was also involved in efforts to lobby the government on the writing of financial industry regulations.
Becker was part of the leadership of two lobbying organizations representing the tech sector, serving as the chairman of TechNet until January 2023, and also sat on the executive board of the Silicon Valley…
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