First Republic Bank Sold to JP Morgan After Third Major US Lender Falls
Key Highlights :
The US banking system is facing a crisis following the collapse of the third major lender in two months. First Republic Bank, a Californian lender, was seized by regulators on Monday morning amid concerns about its financial health. In response, JP Morgan Chase has agreed to take on the bank’s deposits and most of its assets.
The Federal Deposit Insurance Corporation (FDIC) estimated that the cost to the Deposit Insurance Fund would be about $13bn, but this is yet to be fully determined. The collapse is likely to reignite concerns about the health of the US banking system and the Biden administration’s handling of the crisis.
First Republic Bank was valued at $27bn at the start of February but came under pressure following the collapses of Silicon Valley Bank and Signature Bank in March. Its shares plunged last week after it revealed its deposits had fallen $100bn between January and March, as wealthy customers and businesses pulled their money amid jitters about the health of the sector.
The FDIC's review of the collapse of Silicon Valley Bank blamed regulators for failing to properly supervise the lender before it collapsed last month. A combination of poor bank management, weak regulations and lax government supervision led to the collapse, according to the report.
JP Morgan Chase has agreed to take on all of the bank’s deposits and most of its assets, according to a statement from the FDIC. Jamie Dimon, chief executive of JP Morgan Chase, said: “Our government invited us and others to step up, and we did.” He added that the deal would minimise cost to the Deposit Insurance Fund and would leave the bank “very well capitalised”.
The 84 offices of First Republic Bank in eight states will reopen as branches of JP Morgan Chase Bank from Monday. JP Morgan has been on a buying spree since 2021, acquiring more than 30 companies in deals worth more than $5bn combined.
The collapse of First Republic Bank is the latest in a series of events that have shaken the US banking system. The Biden administration will need to take decisive action to restore confidence in the sector and ensure that similar events do not occur in the future.
