December 11, 2023

First Republic Bank (FRB), on the brink of failure in the weeks following the Silicon Valley banking crisis, finally collapsed, but quickly entered the next chapter: Today’s FDIC (FDIC) Announce It was closed by the California Department of Financial Protection and Innovation, and the FDIC was named receiver, who will sell the assets to JPMorgan.

Its assets and deposits combined are just over $330 billion.

Specifically, “to protect depositors, the FDIC is entering into a purchase and assume agreement with J.P. Morgan National Association of Banks of Columbus, Ohio, to assume all deposits and substantially all assets of First Republic Bank,” it said.

The FDIC also confirmed that deposits will continue to be insured by the FDIC at an estimated cost of approximately $13 billion to its insurance fund. The deal will cover $229.1 billion in assets and $103.9 billion in total deposits. JPMorgan is buying all assets and deposits, as well as 84 offices in eight states, and all of FRB’s depositors are now JPMorgan customers.

When is this news hype days FRB will crash, sending the stock into a death spiral. JPMorgan and PNC were among the banks that submitted bids over the weekend. The FDIC called the process “competitive.”

bank partner

Like Silicon Valley Bank, First Republic has been a major banking partner in technology as it has grown into a huge and very valuable industry. This means that it will almost certainly fall within the blast radius of the SVB when it collapses.

To avoid a contagion effect, the First Republic quickly released information about its own stability after the collapse of the SVB. So, just as SVB began selling its assets — at the same time, in fact, SVB announced the sale of its UK business to HSBC — First Republic strengthened its position with a massive capital injection, bringing its reserves to $70 billion. The FDIC is one of these big funders. another? JPMorgan.

Still, it doesn’t look like that’s enough. Confidence in companies too dependent on the same industry as SVB was shaken, prompting people to flee the First Republic as customers and investors.

The FDIC has had to deal with its own drama and criticism — some have blamed SVB’s collapse on U.S. regulators for not acting quickly or decisively before it was too late — so it’s a relatively quick one for it. move. While the estimated cost of its deposit insurance fund is about $13 billion, the final figure will be determined when it is no longer in receivership.

In addition to this deal, the FDIC, JPMorgan and National Association “are also entering into a loss sharing trade single family, residential and commercial loans it purchased from the former First Republic Bank,” it added. The FDIC is the recipient, while JPMorgan and National Association “will share losses and potential recoveries on the loans covered by the loss sharing agreement ’. It’s unclear what the value of this aspect of the deal is.