JP Morgan Chase to take over First Republic Bank

The FDIC announced the collapse of First Republic Bank on Monday in an official statement. JP Morgan, a major investment bank, will take over most of First Republic’s assets and deposits. 

The bank’s stock fell by more than 75% last week when it revealed that its customers withdrew $100 billion in deposits in March. This is the third collapse of a bank in the United States in recent months, raising fears of a bigger banking catastrophe. Silicon Valley Bank and Signature Bank are the other banks that failed in March.

According to sources, US officials approached six banks in an effort to find First Republic a rescue deal. Jamie Dimon, CEO of JP Morgan Chase, said that the government requested his bank and others to step in and assist, and they accepted. According to Dimon, JP Morgan’s takeover of First Republic will have little advantage and complement its existing business. First Republic will provide the bank with $173 billion in loans, $30 billion in securities, and $92 billion in deposits. As part of the agreement, the FDIC would split loan losses with JP Morgan, with an anticipated $13 billion in damage to its insurance fund.

The bank’s 84 offices in eight states are scheduled to reopen on Monday as JP Morgan Chase Bank branches after authorities took control and quickly sold it to the Wall Street firm. The Federal Reserve was forced to take unusual steps to stabilise financial markets as a result of deposit flights from some lenders. First Republic, a mid-sized US lender specialising in rich clients, was created in 1985 and has suffered the impact of recent bank withdrawals.

Following the failures of Silicon Valley Bank and Signature, the FDIC ensured that all deposits would be guaranteed to avoid a bank run, in which many people try to withdraw their money simultaneously. Swiss authorities arranged Credit Suisse’s March takeover by rival UBS in Europe. The recent hike in interest rates by global central banks to combat inflation has put pressure on a number of banks. Banks’ holdings of bonds bought at lower interest rates have declined in value as rates have risen.