The US government seized California’s First Republic Bank as the institution has been struggling amidst the financial turmoil that shook the banking system. In addition, the bank was sold to the financial service company JPMorgan Chase & Co.
As per Monday’s announcement, JP Morgan would acquire $173 billion in loans, $30 billion in assets, and $92 billion in deposits from the bankrupt lender as part of the agreement. Though the company declared the bank’s acquisition, the size of the payment made by the financial institutions was not disclosed. First Republic faces mounting pressure as it reveals over $100 billion in outflows during the first quarter and considers potential solutions.
On May 1, the media platform The Spectator Index shared a Twitter thread on the matter, commenting that the closure of First Republic Bank has marked “the second biggest bank failure in US history”:
BREAKING: First Republic Bank has officially been closed by regulators, making it the second biggest bank failure in US history, as JPMorgan buys its assets.
— The Spectator Index (@spectatorindex) May 1, 2023
The banking industry has been facing increased pressure due to the recent closure of the banking giants Silicon Valley Bank (SVB) and Signature Bank in March and UBS’s takeover of Credit Suisse with the government’s help.
Notably, the shares of First Republic Bank experienced a significant drop of 43.3 percent during premarket trading. The stock has experienced a significant decline in value, losing 97 percent of its worth this year, while JPMorgan’s stock experienced a 2.7 percent increase.
Interestingly, in a statement, Jamie Dimon, CEO of JPMorgan, commented on the government’s aid in the establishment of the industry, adding:
Our government invited us and others to step up, and we did. Our financial strength, capabilities, and business model allowed us to develop a bid to execute the transaction to minimize costs to the Deposit Insurance Fund.
The First Republic Bank was temporarily taken over by the Federal Deposit Insurance Corporation (FDIC) over the weekend. The FDIC oversees the sale in what it calls a competitive bidding process.
Federal regulators intervened in March to safeguard the clients of Silicon Valley Bank and Signature Bank. In an unprecedented move, all deposits at two banks have been insured by regulators, citing potential risk to the broader financial system. This includes deposits that exceed the FDIC’s $250,000 threshold for insurance.
