US Regulators Seize Assets Of First Republic Bank, To Be Sold To JPMorgan

JPMorgan will "assume all deposits, including all uninsured deposits, and substantially all assets" of First Republic, the California Department of Financial Protection and Innovation said

First Republic specialises in private banking that caters to wealthier people, much like Silicon Valley Bank, which failed in March, focused on venture capital firms.

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First Republic Bank's assets were taken over by the US regulators and will be acquired by JPMorgan Chase after rescue efforts failed to undo the damage from wrong-way investments and depositor runs that have roiled regional lenders, news agency Bloomberg reported on Monday.

According to the report, JPMorgan will "assume all deposits, including all uninsured deposits, and substantially all assets" of First Republic, the California Department of Financial Protection and Innovation said in a statement. The regulator has appointed the Federal Deposit Insurance as receiver of the San Francisco-based bank. "Deposits are federally insured by the FDIC subject to applicable limits," the DFPI said.

The Spectator Index also tweeted the development. 

BREAKING: First Republic Bank has officially been closed by regulators, making it the second biggest bank failure in US history, as JPMorgan buys its assets.

— The Spectator Index (@spectatorindex) May 1, 2023

The transaction makes JPMorgan, US' largest bank, even more massive — an outcome government officials have taken pains to avoid in the past. Because of US regulatory restrictions, JPMorgan’s size and its existing share of the US deposit base would prevent it under normal circumstances from expanding its deposit base further. And prominent Democratic lawmakers and the Biden administration have chafed at consolidation in the financial industry and other sectors.

JPMorgan was a key player throughout First Republic’s struggles. The bank advised its smaller rival in its attempt to find strategic alternatives, and Chief Executive Officer Jamie Dimon was key in marshalling bank executives to inject $30 billion in deposits into First Republic to shore up its finances amid heavy withdrawals in March.

First Republic specialises in private banking that caters to wealthier people, much like Silicon Valley Bank, which failed in March, focused on venture capital firms. Chairman Jim Herbert started the lender in 1985 with fewer than 10 people, according to a First Republic history. By July 2020, the bank said it ranked as the 14th-largest in the US, with 80 offices in seven states. It employed more than 7,200 people at the end of last year.

Like other regional lenders, First Republic found itself squeezed as the Federal Reserve jacked up interest rates to fight inflation, which hurt the value of bonds and loans the bank bought when rates were low. Meanwhile depositors fled, partly in search of better returns and then in fear as worries spread about First Republic’s health.

Meanwhile, the US Federal Reserve acknowledged its own shortcomings and called for increased banking oversight in a report published on Friday regarding the collapse of Silicon Valley Bank (SVB) last month. The Federal Reserve's much-anticipated review attributed the collapse of Silicon Valley Bank to a combination of factors, including inadequate bank management, relaxed regulations, and insufficient government supervision. The report highlights how the US Feds failed to adequately oversee the bank prior to its collapse early last month.