US financial regulators have taken control of First Republic, a California-based bank that will be purchased by JPMorgan Chase, as announced by the government sector regulator on Monday. This comes after attempts to rescue the struggling bank proved unsuccessful.
This action renders First Republic the second largest bank failure in US history, slightly surpassing the Silicon Valley crash in March, but still smaller than the Washington Mutual failure in 2008.
The Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver of First Republic, and JPMorgan Chase Bank, National Association submitted a bid to acquire all deposits and most of the assets of First Republic Bank. JPMorgan also agreed to purchase substantially all of First Republic’s assets.
Read more: U.S. banks bid for First Republic Bank
As of April 13, First Republic Bank had approximately $229.1 billion in total assets and $103.9 billion in total deposits.
According to a report by the Financial Times, the FDIC entered into a loss-sharing agreement with JPMorgan over unrealized losses on First Republic’s loan portfolio that were caused by the recent increase in interest rates. The FDIC estimated that the losses in its insurance fund would total around $13 billion. First Republic was unable to devise a feasible rescue plan and announced last week that it had lost over $100 billion in deposits in Q1 of this year.
The acquisition move comes after the collapse of Silicon Valley Bank and Signature Bank last month due to financial turmoil engulfing mid-size regional banks in the US. JPMorgan led a group of 11 banks that had extended a $30 billion lifeline to First Republic in March, but investor concerns persisted.
First Republic said it was taking steps to shore up its balance sheet and cut its workforce after deposits fell to about $104.5 billion in the first quarter of this year.
The share price of the lender has fallen more than 97% year to date.
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