Regulators shut First Republic Bank, JPMorgan named buyer of $330 billion in assets and deposits, FDIC on hook for $13 billion

by The Insights

The First Republic Bank (FRB), on the brink of collapse in the weeks following the Silicon Valley Bank crisis, finally sank, but with a relatively quick resolution in its next chapter: today, the Federal Deposit Insurance Corporation (FDIC) announced that it was being shut down by the California Department of Financial Protection and Innovation, the FDIC was appointed as receiver, and the FDIC would sell the assets to JPMorgan.

Its assets and deposits total just over $330 billion combined.

Specifically, “To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits and substantially all of the assets of First Republic Bank,” he said.

The FDIC also confirmed that deposits will continue to be insured by the FDIC at an estimated cost of approximately $13 billion to its insurance fund. The deal will cover $229.1 billion in assets and $103.9 billion in total deposits. JPMorgan buys all assets and deposits, as well as 84 offices in eight states, with all FRB depositors now clients of JPMorgan Chase.

The news comes after several days of speculation that the FRB would collapse, sending the stock into a death spiral. JPMorgan, along with PNC, were among the banks that submitted bids over the weekend. The FDIC called the process “highly competitive.”

Banking partner

Like Silicon Valley Bank, First Republic has been a major banking partner of the tech world as it has grown into a huge and highly valuable industry. This meant he would almost certainly fall within SVB’s blast radius when he went down.

To avoid a contagion effect, First Republic was quick to deliver messages about its own state of stability in the wake of SVB’s failure. So just as SVB began selling its assets – at the same time, in fact, as SVB announced the sale of its UK operations to HSBC – First Republic strengthened its position with massive funding injections to boost its reserves. at $70 billion. One of those big backers was the FDIC. The other? JP Morgan.

However, it seems that this was not enough. The loss of confidence in companies that were too dependent on the same sector as SVB caused people to flee the First Republic both as customers and as investors.

The FDIC has had to deal with its own drama and its own criticisms – some blame the collapse of SVB on US regulators who did not act quickly or decisively enough before it was too late – and this was therefore a relatively quick decision on his part. While the estimated cost for its deposit insurance fund is around $13 billion, the final figure will be determined when it leaves receivership.

Along with this agreement, the FDIC, JPMorgan Chase Bank, and the National Association “are also in the process of entering into a loss-sharing transaction on the single-family, residential, and commercial loans they purchased from the former First Republic Bank.” , he added. The FDIC is the receiver, while JPMorgan Chase Bank and the National Association “will share potential losses and recoveries on loans covered by the loss-sharing agreement.” The value of this aspect of the agreement is unclear.

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