First Republic Bank (FRB), teetering on the brink of collapse in the weeks following the Silicon Valley Bank crisis, has finally fallen, but with a relatively quick resolution in its next chapter: today the Federal Deposit Insurance Corporation (FDIC ) has announced that the California Department of Financial Protection and Innovation was closing, that the FDIC was appointed as receiver, and that the FDIC would sell the assets to JPMorgan.
Its assets and deposits add up to just over $330 billion in total.
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 of the deposits and substantially all of the assets of First Republic Bank,” he said.
The FDIC also confirmed that the deposits will continue to be insured by the FDIC at an estimated cost of about $13 billion in its insurance fund. The deal will cover $229.1 billion in assets and $103.9 billion in total deposits. JPMorgan is buying all assets and deposits, along with 84 offices in eight states, with all FRB depositors now JPMorgan Chase customers.
The news comes after several days of speculation that the FRB would collapse, sending stocks 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.”
Bank partner
Like Silicon Valley Bank, First Republic has been a major banking partner in the tech world as it grew into a huge and highly valuable industry. This meant that it would almost certainly fall into SVB’s blast radius when it collapsed.
To avoid a contagion effect, First Republic moved quickly to message its own stable status in the wake of SVB’s failure. So when SVB started to sell its assets, at the same time as SVB announced the sale of its UK business to HSBC, First Republic strengthened its position with massive injections of funding to bring its reserves to 70 billion of dollars One of the big funders was the FDIC. The other? JPMorgan.
However, it seems that this is not enough. Distrust of companies that were too dependent on the same sector as SVB caused people to flee First Republic as both customers and investors.
The FDIC has had to deal with its own drama and criticism: some blame the collapse of the SVB on US regulators not acting quickly or decisively enough before it was too late, so it be a relatively quick move on his part. While the estimated cost for its Deposit Insurance Fund is about $13 billion, the final figure will be determined when it ceases to be liquidated.
In parallel with that settlement, the FDIC, JPMorgan Chase Bank and National Association “are also entering into a loss transaction on single-family, residential and commercial loans that it purchased from the former First Republic Bank,” it added. The FDIC is the receiver, while JPMorgan Chase Bank and National Association “will share the losses and potential recoveries on the loans covered by the loss sharing agreement.” It is not clear what the value of this aspect of the agreement is.
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The banking world was rocked by the news that regulators had closed First Republic Bank, one of the biggest commercial banks in the United States. It was announced that JPMorgan Chase would be buying its assets and deposits, a total of around $330 billion. Meanwhile, the Federal Deposit Insurance Corporation (FDIC) is on the hook for $13 billion.
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