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First Republic Bank closes, the second largest bank failure in US history

2023-05-01 15:50:01, Ekonomi CNA

Regulators seized First Republic Bank on Monday morning and all of its deposits and assets were bought by JP Morgan Chase Bank in an effort to avoid a further banking crisis in the United States.

This is the third mid-sized US bank to fail in two months.

The JPMorgan Chase bank will pay the Federal Deposit Insurance Corporation an amount of 10.6 billion dollars, as part of the agreement for the purchase of the majority of the assets of the bank based in San Francisco, "First Republic".

This is the second largest bank failure in the history of the United States, after that of the "Washington Mutual" bank, which went bankrupt at the height of the financial crisis of 2008.

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It was also bought by "JP Morgan Chase" bank.

"The government invited us and others to act and we did," said Jamie Dimon, CEO of JPMorgan Chase Bank.

First Republic Bank has been in crisis since the March bankruptcy of Silicon Valley and Signature Bank amid growing concerns among investors and depositors that it could fail due to high numbers of uninsured deposits and bad loans. low interest rates.

The Federal Deposit Insurance Corporation said Monday that 84 First Republic bank branches in eight states will reopen as branches of JP Morgan Chase and that depositors will have full access to their money.

Regulators scrambled over the weekend to find a solution before U.S. stock markets opened.

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According to the authorities, until April 13, the assets of the "First Republic" bank were worth 229 billion dollars, while the total number of deposits was 104 billion dollars.

Late last year, the Federal Reserve ranked it as the 14th largest US commercial bank.

The Federal Deposit Insurance Corporation said its insurance fund will suffer a loss of $13 billion due to the takeover of First Republic Bank.

The intervention for the bank "Silicon Valley" cost the insurance fund a record value of 20 billion dollars.

Before Silicon Valley Bank failed, First Republic Bank had profits that were coveted by the entire industry.

Her clients – mostly the rich and powerful – rarely defaulted on their loans.

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Much of the bank's profits came from low-rate loans to the wealthy, among them the CEO of the Meta platform, Mark Zucherberg.

First Republic Bank experienced a doubling of total assets from the $102 billion it had at the end of the first quarter of 2019, when the number of its employees was 4,600.

But the vast majority of its deposits, similar to those of Silicon Valley and Signature banks, were uninsured. This was the biggest concern of analysts and investors.

If the bank were to fail, its depositors might not get all their money.

This fear was felt in the last quarter. The bank said that depositors withdrew over 100 billion dollars during the April crisis./ VOA