"This is a sad example of a spooked public," said Gene Ludwig, a former comptroller of the currency and CEO of Ludwig Advisors. It also highlights how fatal the spread of fear can be to a bank's health. The third bank failure in less than two months raises questions about whether the turmoil in the industry is over, despite regulators' reassurances that the sector is strong and stable. "They essentially would not have had anywhere near the kind of problems they had if Silicon Valley Bank had not failed because there was significant crossover in the types of customers, and it all happened in the Bay Area." "First Republic was like the person waiting at the crosswalk when a drive-by shooting occurs on the corner," said Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University. Regulators stepped in and deployed a systemic risk exception for Silicon Valley and Signature Bank, a crypto-friendly bank that also collapsed in March, in the hopes that covering their uninsured deposits would curb contagion throughout the banking system. The First Republic's collapse came only weeks after similar concerns emerged over the now-failed Silicon Valley Bank. The agency said its deal with JPMorgan was the result of a "highly competitive bidding process." There was no mention of the deposit cap in the FDIC's announcement on Monday. The law provides an exception for deals involving banks that are "in default or in danger of default."
The government's calculus was complicated by a provision in federal law that prohibits regulators from approving mergers of banks from different states that would result in the acquiring bank controlling more than 10% of all insured deposits in the United States. The last-minute talks followed failed efforts to negotiate a deal that would have avoided the need for government intervention. Reuters also reported that Citizens Financial Group was interested. Bancorp and Bank of America weighed bids, the news outlet said. Besides JPMorgan, PNC Financial Services Group, U.S. Regulators and banks spent the weekend discussing options, with the FDIC asking banks to place bids for the company by Sunday, according to Bloomberg News. The share price fell below $4 on Friday, a staggering drop from its highs of nearly $220 in 2021.
Its stock sank after the earnings report and fell further later in the week as a failure looked increasingly likely. A week ago, First Republic signaled that its situation was more dire than previously believed, and said it was "pursuing strategic options." history by assets, pulling ahead of the collapse of the $209 billion-asset Silicon Valley Bank last month, according to FDIC data.įears about First Republic's health had deepened over the last week after the bank disclosed a massive drop in deposits, spurring regulators and big banks to engage in talks about rescuing the troubled firm. The difference in those two figures was not immediately clear.įirst Republic is the second-largest bank failure in U.S. JPMorgan said in its release Monday that it has assumed $92 billion of deposits.
That does not include about $2 billion of post-tax restructuring costs anticipated over the next 18 months, the JPMorgan release said.įirst Republic had $103.9 billion of deposits at April 13, according to the FDIC release. The company expects to record an upfront, one-time, post-tax gain of about $2.6 billion. The deal "modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise," Dimon said. "Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund." "Our government invited us and others to step up, and we did," JPMorgan Chairman and CEO Jamie Dimon said in a separate news release issued by the company. The failure is expected to cost the federal Deposit Insurance Fund about $13 billion, the release said.
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