United States Federal regulators have seized First Republic Bank which will now be sold to JPMorgan marking the third major bank to collapse in less than two months.
According to NBC News, the Federal Deposit Insurance Corp. (FDIC) announced that it had taken over First Republic Bank on Labour Day, May 1 2023, and that JPMorgan Chase, the largest bank in America, would acquire most of the bank’s assets and deposits.
To protect depositors, we entered into an agreement with JP Morgan Chase Bank to purchase and assume all deposits and assets of First Republic Bank. Read more ➡️ https://t.co/8KCKgJ2ZWR. pic.twitter.com/FRrIZk5aBY
— FDIC (@FDICgov) May 1, 2023
As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.
First Republic held $229.1 billion in total assets at the time of closure, more than Silicon Valley Bank ($209 billion at the time of closure) making this the second-largest bank failure in American history.
Top 10 Bank Failures in the US historyThe action by federal regulators to seize and sell First Republic Bank comes in the wake of the bank reporting a significant loss of about 40% of its deposits in the first quarter of 2023. According to NBC, with the failures of Silicon Valley Bank and Signature Bank earlier in 2023 and the recent rise in interest rates, many depositors have been seeking to move their money to banks that are perceived as safer and offer more appealing returns.
As of mid-March 2023, around 70% of First Bank’s deposits were uninsured, which meant they exceeded the FDIC’s guaranteed limit of $250,000, according to Bank of America.
Compared to other medium-sized banks, First Republic had a higher percentage of uninsured deposits at around 70%, which was the third-highest level after Silicon Valley Bank and Signature Bank. The median percentage of uninsured deposits for medium-sized banks was 55%.
In spite of a $30 billion cash injection from 11 peer banks in mid-March 2023, First Republic was unable to stem the outflow of funds. As a result, its stock price declined by over 75% over the past 30 days.
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