Bank of America CEO says crisis ‘too strong a word’ for bank turmoil
Bank of America was among 11 companies that helped shore up ailing First Republic Bank
Washington: The recent turmoil that hit regional banks in the US didn’t rise to the level of crisis, and the deposit insurance covered by lenders did a good job of protecting customers, Bank of America Corp. CEO Brian Moynihan said.
“Crisis is too strong a word, and words like that get used a lot,” though there was “a fair amount of disruption for a few weeks there,” Moynihan said Thursday at Bloomberg’s Sell-Side Leaders Forum in New York. Deposit insurance “worked pretty well. The industry pays for the deposit premiums. We insure ourselves. The government is the go-between to make sure people believe it’s there. And they get the money back from us.”
Bank of America was among 11 companies that helped shore up ailing First Republic Bank with a combined $30 billion deposit infusion as it faced panic in the wake of Silicon Valley Bank’s failure. Charlotte, North Carolina-based Bank of America contributed $5 billion to the effort, which involves each firm parking money at First Republic for at least 120 days.
The steps taken were “to provide liquidity, because it was a liquidity question,” Moynihan said.
Moynihan’s comments follow Bank of America’s first-quarter results earlier this week, with the firm reaping the benefits of rising rates and market volatility that fueled fixed-income sales and trading. Revenue from fixed-income, currencies and commodities trading unexpectedly rose almost 30 per cent to $3.4 billion, the highest in a decade.
The bank’s deposits fell less than analysts expected, as customers piled into the biggest US banks after the collapse of Silicon Valley Bank and two other firms in March. The lender had $1.91 trillion in deposits at the end of March, down about $20 billion from the end of 2022, as an influx of clients seeking safety countered outflows from inflation and customers seeking higher-yielding alternatives.
Changing the government’s deposit-insurance process “ought to be carefully dealt with only because it’s been in place since the ‘30s,” Moynihan said, “and it’s worked pretty well.”