In a rapid series of events, federal regulators seized control of First Republic Bank as it teetered on collapse and transferred it to JP Morgan Chase, representing the third major American bank failure so far this year and the second largest in history.
The FDIC announced Monday that regulators had seized the assets of the bank. The federal agency said that the First Republic’s 84 offices across eight states would reopen the same day as branches of JP Morgan.
The FDIC said that it would continue to insure deposits at the former bank and that “customers do not need to change their banking relationship in order to retain their deposit insurance.”
The agency also called for current First Republic customers to keep using their accounts until they receive guidance from JP Morgan.
The FDIC stated that First Republic had almost $230 billion in assets and more than $100 million in deposits as of April 2023. JP Morgan agreed to purchase all of these assets.
The FDIC and JP Morgan also announced a “loss-share transaction on single family, residential and commercial loans” from First Republic. This would make FDIC the receiver and the agency “will share in the losses and recoveries on the loans covered by the loss-share agreement.”
The agency said that the transfer was part of a “highly competitive bidding process” that complied with federal regulations.
The FDIC added that the total cost to its Deposit Insurance Fund will be approximately $13 billion.
The decline of First Republic followed two major bank failures in March. Silicon Valley Bank, based out of California, collapsed and was seized by the FDIC. This was followed by the collapse of the New York-based Signature Bank Mar. 12.
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
First Republic had been struggling since the collapse of the two other large banks. However, several major institutions attempted to shore up the finances of the struggling bank through a number of large deposits.
JP Morgan was among the banks that injected $30 billion into First Republic in March. However, the approach did not prevent the rapidly-occurring events this week. The collapse of the bank appeared anticipated by the markets, which led to a mild trading day as of midday Monday.
