This is an audio transcript of the FT News Briefing podcast episode: ‘Wall Street banks rescue First Republic’

Sonja Hutson
Good morning from the Financial Times. Today is Friday, March 17th, and this is your FT News Briefing.

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The biggest US banks teamed up to rescue a smaller rival. We’ll tell you about the British bank that may have emerged from the banking turmoil as a big winner.

Stephen Morris
They got to look like good citizens as well as potentially getting this good strategic deal. So I think they’re feeling quite smug about it, actually.

Sonja Hutson
Plus, French president Emmanuel Macron made a high-stakes gamble to push forward his unpopular retirement reform. I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

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Eleven of the biggest US banks yesterday said they would support a smaller lender with a $30bn cash deposit. First Republic is based in San Francisco and was hit by depositor withdrawals after Silicon Valley Bank collapsed. First Republic shares have fallen 64 per cent in the past week. The FT’s Ortenca Aliaj told us the rescue was led by JPMorgan chief Jamie Dimon.

Ortenca Aliaj
I mean, for JPMorgan, it’s an obvious thing to do because they’re obviously advising the bank. But I think for the other banks as well, you’ve had this, you know, a week now of banking shares taking a hit and investors and people in the market looking at sort of who’s next, you know, who has the same vulnerabilities as Silicon Valley Bank and really they want to put a stop to it. They want to say that actually our financial system is fine. Look, you don’t need to pull your deposits out of First Republic. We’re putting $30bn of deposits in there and essentially your money’s safe.

Sonja Hutson
That’s the FT’s Ortenca Aliaj.

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The First Republic rescue follows the backstopping of one of Europe’s big lenders. Credit Suisse stock plummeted earlier this week, so the Swiss central bank threw out a lifeline. The ongoing turmoil had prompted talk that the European Central Bank might ease up on interest rate rises at their Thursday meeting. That didn’t happen. The ECB raised rates by half a percentage point. Here’s the FT’s Martin Arnold.

Martin Arnold
There was quite a lot of relief in the room, I’m told, after the Swiss central bank came out and provided a SFr50bn liquidity line to Switzerland’s second-biggest bank on Wednesday night. And so on Thursday morning, there was a rally in banking shares, and that really gave the ECB confidence to go ahead with the half-a-percentage-point increase in borrowing costs that it had widely signalled it was planning to do.

Sonja Hutson
So Martin, did the ECB signal what they would do next after this latest decision?

Martin Arnold
Well, this has been the other big change for the ECB. There’s really no forward guidance beyond saying that they think their inflation forecasts are indicating they still have some ground to cover. But they say there’s a lot of uncertainty around those forecasts, especially given what’s happening in the banking sector. And from speaking to people on the council, I can tell you that that is something that the doves are very pleased about. They feel like that’s the first opening of the door to potentially stopping rate rises in future. If inflation continues to come down, if the banking turmoil calms, and then I think that they could be getting closer to stopping rate rises.

Sonja Hutson
Martin Arnold is the FT’s Frankfurt bureau chief.

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Amid all the banking turmoil of the past week, one of the big surprises was who ended up buying Silicon Valley Bank’s UK arm. And get this, they only paid £1. Here’s the FT’s banking editor, Stephen Morris.

Stephen Morris
If you told me at the beginning of the week HSBC would end up owning Silicon Valley Bank UK, the bank of choice for start-ups and tech companies and even crypto in the UK, I would have told you were mad.

Sonja Hutson
So as you’ve reported, Stephen, this decision was made in an all-night session with a whole bunch of banks. They looked at the information they had on SVB UK and a bunch of the loans were kind of murky. How did HSBC end up being the buyer?

Stephen Morris
All of the other banks fell away, apart from HSBC, who kind of realised, reading the body language and mood music of the regulators and politicians in the room, that they were the only show in town. And obviously being one of the largest banks in the world with a $3tn balance sheet, they had enough to prop up this relatively small lender, specifically to tech firms. So they ended up taking a little bit of a gamble on this.

Sonja Hutson
So what benefits does HSBC have in owning Silicon Valley Bank UK, and what are some of the challenges?

Stephen Morris
You know, I spoke to one of their executives who said they think it will advance them two to three years along their strategic plan by bringing in all of these clients en masse and a lot of expertise as well of people working in the start-up industry. And they also hope that it will cross-pollinate with other areas of the business as well.

There are still questions about the cultural fit. HSBC is a very old commercial bank focused on trade flows around the world. The second challenge is what to do with any of the crypto-related companies. HSBC has a well-publicised aversion to doing anything in this space. So it’s more than likely that they will have to gently and politely offboard a lot of their crypto clients quite quickly. And the third risk is this 30 per cent of the loans, which they weren’t able to properly analyse or do due diligence on beforehand. A lot of those could go bad.

And let’s not forget here, this was a big PR win for them. They rescued a bank. They helped out the Bank of England. They helped out the government. They got to look like good citizens as well as potentially getting this good strategic deal and a good deal from a financial sense as well. So I think they’re feeling quite smug about it, actually.

Sonja Hutson
Stephen Morris is the FT’s banking editor.

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News clip
(Protesters chanting)

Sonja Hutson
Protesters gathered outside France’s National Assembly yesterday. It was right after President Emmanuel Macron pulled a controversial vote on a pension reform bill that would raise the retirement age by two years. Macron then used a move to overrule lawmakers and push the bill through without a vote. Here’s the FT’s Leila Abboud in Paris.

Leila Abboud
This is an incredibly unpopular thing to do with the French public. It’s roughly about, you know, three-quarters, depending on the poll, of the public that disagrees with this. And there have been a lot of protests in the past few months about it. Retirement is something that is near and dear to their hearts. They’re willing to sort of fight to protect it more than in most other countries. Ironically, Spain is sort of doing another pensions reform just across the border. It’s not about raising the age, but it’s similar in that they’re tweaking the system and it’s not really resulting in massive protests.

Sonja Hutson
So why was Macron so determined to push this through by decree if a clear majority of French people don’t want it and it looked like lawmakers may not have approved of it either?

Leila Abboud
I mean, Macron believes that this is the right thing to do for the country. And, you know, like many western democracies or countries, it has an ageing population. So there are fewer workers for each retiree. And then Macron’s sort of diagnosis is that as a result, you need to reform the pension system, raise the retirement age to reflect the fact that people live longer and that there are fewer workers per retiree. And if you don’t, you’re gonna end up with a sort of financial crisis or a deficit problem with the pension system in the coming decades.

Sonja Hutson
Bringing it back to now, though, Macron has used this decree and lawmakers can respond by calling a no-confidence vote and theoretically bring the government down. Could that happen?

Leila Abboud I’d put it as a low-probability event — doesn’t mean it can’t happen, but it’s probably not the most likely scenario. But that’s actually almost not the issue. There’s a sort of almost quite probable scenario, which is that the government survives a no-confidence vote, but still has a political crisis on its hands that it can’t really control, right. It’s more a question of, you know, what has this moment and kind of the past few months, what is it gonna change and what does it mean for whether Macron can really have a successful second term? He has sort of touched off this process, which fundamentally could weaken him in the long term, even if in the short term he survives.

Sonja Hutson
That’s the FT’s Paris bureau chief, Leila Abboud.

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You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news.

The FT News Briefing is produced by Marc Filippino, Fiona Symon and me, Sonja Hutson. Our editor is Jess Smith. We had help this week from David da Silva, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

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