JP Morgan acquires seized First Republic Bank in second-largest bank failure
By Zion Rufus
In a move aimed at addressing concerns about the state of the U.S. banking industry, federal regulators have seized First Republic Bank and sold its assets and deposits to JPMorgan Chase Bank. This marks the second largest bank failure in the country’s history, after the 2008 financial crisis.
The seizure of First Republic Bank by the Federal Deposit Insurance Corporation (FDIC) is seen as a necessary step to prevent a potential domino effect on the banking sector, which has already been weakened by the economic fallout from the COVID-19 pandemic. The bank, which was headquartered in San Francisco, had struggled in recent years with high levels of non-performing loans and a decline in profitability.
Under the terms of the deal, JPMorgan Chase Bank acquires all First Republic assets and agrees to assume responsibility for all of its deposits, including those above the federal insurance limit of $250,000 per account. The First Republic had about $229.1 billion in assets and $103.9 billion in deposits, according to the Washington Post.
“JPMorgan now holds more than $2.4 trillion in deposits. To put this into perspective, that’s almost the entire market cap of Apple. And that’s not even it,” said Linas Beliunas, a financial expert.
“On top of all this, the FDIC is covering $13 billion in losses and providing $50 billion in financing. This is another masterstroke from Jamie Dimon that further cements JPMorgan as the Microsoft of Banking,” he added in a LinkedIn statement.
Commenting on the acquisition, Sheila Bair, Author, corporate director, and former chair FDIC said: “Congratulations to the FDIC for seamlessly engineering the sale of First Republic to JPM Chase without the need for a systemic risk determination. As the agency approaches its 90th birthday, it continues its proud and perfect record of protecting insured depositors. With this resolution, the uninsured were also protected, but with the acquirer, not the DIF, covering the cost. Well done!”
The FDIC will retain control of the bank’s remaining assets, which will be sold off over time. The sale is expected to have little impact on customers of either bank, who will continue to have access to their accounts as usual.
The acquisition of First Republic Bank’s assets by JPMorgan Chase Bank is seen as a positive move for the banking sector as a whole. JPMorgan Chase Bank, one of the largest banks in the country, is well positioned to absorb First Republic Bank’s assets and to weather any potential challenges that may arise in the future.
The seizure of First Republic Bank also highlights the ongoing challenges facing the banking industry in the aftermath of the COVID-19 pandemic. Many banks have struggled with a surge in loan defaults and a decline in profitability as a result of the economic downturn. While the economy has begun to recover, it is expected to take several years for the banking sector to fully rebound.
While it is a sobering reminder of the challenges facing the sector, it is also a positive move towards stabilizing the industry and ensuring its continued viability. As the economy continues to recover, it is hoped that the banking sector will also recover and emerge stronger than ever before.
JPMorgan Chase Bank, National Association submitted a bid for all of First Republic Bank’s deposits. As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.
Deposits will continue to be insured by the FDIC, and customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Chase Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well.
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