There is a reason banks do not align the duration of assets and liabilities. On Monday afternoon, First Republic reported its first-quarter results. Assets looked decent, totalling $233bn. That was nearly 10 per cent higher than three months ago. The gross liabilities of the US regional bank had a similar jump.
Its problem is the new composition of those liabilities. Client deposits — excluding a supportive sum from a group of large banks — fell from $176bn to $74bn. The drop was heaviest among customer funds that were earning no interest.
In the stead of deposits were $80bn of short-term borrowings from the US Federal Reserve and Federal Home Loan Bank, drawn in the chaos of mid-March. Those funds cost in excess of 4 per cent. First Republic had no choice but to turn on the government cash faucet in order to cover withdrawal requests from nervous customers in the wake of the Silicon Valley Bank collapse.