America's First Republic Bank has suspended dividend payments on its preferred stock, in an apparent precautionary measure amid ongoing troubles within the financial institution and the wider banking system.
The lender, which last month suspended dividend payments on its common stock, said the decision was a "measure of prudent oversight", in a regulatory filing to the Federal Deposit Insurance Corporation on Friday.
"The board of directors determined to suspend payment of the quarterly cash dividend on each series of the bank’s outstanding non-cumulative perpetual preferred stock," it said in the filing.
"Under the terms of each series of preferred stock, the right of holders to receive dividends is noncumulative, and the board is not required to declare a dividend payable in respect of any dividend period."
San Francisco-based First Republic Bank was caught in the middle of a banking crisis in the US, sparked by the surprise collapse of Silicon Valley Bank (SVB), which was seized and placed under receivership by the FDIC last month.
SVB — the bank for technology entrepreneurs and start-ups that was the 16th-largest bank in the US and the biggest in Silicon Valley at its peak — became one of the biggest bank failures in US history, second only to Washington Mutual's collapse in 2008, which triggered the global financial crisis.
It became the starting point for a series of bank collapses in the US, including Silvergate Capital and Signature Bank, both of which are heavily involved in the technology sector.
Eleven major US banks came to the rescue of First Republic, announcing $30 billion in deposits to help shore up the troubled financial institution. Those banks included JP Morgan, Bank of America, Citigroup and Wells Fargo, which each contributed $5 billion of uninsured deposits.
The action is a reflection that the US banking system "has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this", the banks said.
It remains unclear to what extent this liquidity injection will change the fortunes of First Republic.
US Treasury Secretary Janet Yellen also sought to calm fears, telling the Senate Finance Committe that the US banking system "remains sound, and that Americans can feel confident that their deposits will be there when they need them".
However, the odds of a recession in the US have risen after the string of bank failures, which raised concerns about the overall health of the banking sector in country, JPMorgan Chase chief executive Jamie Dimon warned this week.
Ms Yellen reiterated her stance on Friday, saying she expects the US economy to continue growing despite recession concerns amid the banking sector turmoil.
"I continue to anticipate that the US economy will grow and the labour market will remain strong, and inflation will come down," she said.
Adding fuel to the fire was the financial troubles of Credit Suisse, considered one of the global systemically important banks, after its top shareholder said it would not be adding further investment. Fellow Swiss bank UBS agreed to buy its smaller rival for $3.2 billion to try to avoid more turmoil in global financial markets.
