Fact it is the second largest bank failure in United States history (based on asset size – $229 billion as of April 13 except investment banks, like the Lehman Brothers) with its collapse First Republic. It was preceded by that of Washington Mutual in September 2008.

US authorities on Monday took control of First Republic Bank and sold most of it to JPMorgan Chase, hoping to end the banking crisis that erupted in March.

Under the deal, JPMorgan will take all of the bank’s deposits, as well as “substantially” all of its assets, according to a statement from the Federal Deposit Insurance Corporation (FDIC).

The institution was under severe pressure after the bankruptcies of two institutions of a similar profile in early March, of Silicon Valley Bank and Signature.

“Our government called on us, and others, to step in, and we did,” Jamie Dimon, JPMorgan’s chairman and chief executive, said in a separate statement.

“Our financial stability, our capabilities and our business model allowed us to propose an offer that allows us to execute the transaction in a way that minimizes costs to the deposit insurance fund,” the FDIC added.

As part of the venture, First Republic’s loans are to be revalued downward, and the FDIC has agreed to absorb a portion of those losses: the agency estimates that the business this will cost her about 13 billion dollars.

Bank branches will open as usual today.

The history

The US banking establishment was in turmoil following the bankruptcies of SVB and Signature, which were taken over by regulators after mass customer exits that worried about their viability.

The authorities and other major banks then rushed to rescue First Republic to avoid the same fate, with 11 financial institutions agreeing to disburse a total of $30 billion for this purpose.

But this was not enough to reassure investors and the stock continued to fall on Wall Street.

The bank failed to find a satisfactory rescue plan, and when it confirmed last Monday that many customers had withdrawn their deposits in the first quarter of this year, overall more than $100 billion, its stock plummeted.

At the close of the Stock Exchange, on Friday. the value of First Republic did not exceed 654 million dollars, while at the beginning of the year it was worth more than 20 billion dollars and more from 40 billion in its best period, in November 2021.

The authorities, which they seemed reluctant to rush to the rescue of yet another bank, they finally took action.

The FDIC and the Treasury Department asked banks for expressions of interest in the middle of last week, and on Friday allowed a handful of them to access more financial information about First Republic.

JPMorgan was one of several interested buyers, including PNC Financial Services Group and Citizens Financial Group Inc that submitted final bids on Sunday in an auction conducted by U.S. regulators, sources familiar with the matter told Reuters.

The bidding process was “highly competitive” and resulted in a transaction “compliant with the lower cost requirement,” the FDIC said.