Regulators shut down First Republic Bank, JPMorgan named buyer of $330 billion in assets and deposits, FDIC advances for $13 billion.
In the weeks following the Silicon Valley banking crisis, the First Republic Bank (FRB), which was on the brink of collapse, finally sank, but its next chapter was resolved relatively quickly: the Federal Deposit Insurance Corporation (FDIC) announced today. While the California Department of Financial Protection and Innovation is being closed, the FDIC has been appointed as receiver and the FDIC will sell the assets to JPMorgan.
The total amount of its assets and deposits is slightly more than 330 billion dollars.
Specifically, “To protect depositors, the FDIC entered into a purchase and acceptance agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank,” he said.
The FDIC also confirmed that it will continue to insure deposits into the FDIC Insurance Fund at an estimated cost of approximately $13 billion. The deal includes $229.1 billion in assets and $103.9 billion in total deposits. JPMorgan will acquire all assets and deposits, as well as 84 offices in eight states, all FRB depositors are now JPMorgan Chase clients.
The news comes after days of speculation that the FRB would taper, sending stocks into a death spiral. JPMorgan, along with PNC, were among the banks that filed over the weekend. The FDIC called the process “highly competitive.”
Like Silicon Valley Bank, First Republic has become a major banking partner of the tech world as it has grown into a large and highly valuable industry. This means that when it descends, it falls within the blast radius of the SVB.
To avoid contagion, the First Republic was quick to communicate its stability status after the SVB failure. So when SVB began selling its assets – at the same time as SVB announced the sale of its UK operations to HSBC – First Republic strengthened its position by injecting massive financing to boost its reserves. $70 billion. One of those big supporters was the FDIC. Other? J. P. Morgan.
However, it seems that this was not enough. A loss of confidence in companies like SVB that are too dependent on one sector has caused people to flee First Republic as both clients and investors.
The FDIC has had to deal with its own drama and its own criticism — some blame SVB’s collapse on U.S. regulators who didn’t act quickly or enough before it was too late — so this was a relatively quick decision on its part. Although the estimated cost of the Deposit Insurance Fund is about $13 billion, the final figure will be determined when it exits receivership.
In addition to this agreement, the FDIC, JPMorgan Chase Bank and National Association are in the process of entering into a loss-sharing arrangement for the single-family, residential and commercial loans they purchased from the former First Republic Bank. “, he added. The FDIC is the recipient, and JPMorgan Chase Bank and National Association “will share potential losses and repayments on the loans contained in the cost-sharing agreement.” The meaning of this aspect of the agreement is unclear.
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