Friday, June 9, 2023

JP Morgan will buy the First Republic Bank seized by the US authorities

After the bankruptcy of Washington Mutual in 2008, it is the second-largest bank by assets in US history.

US financial authorities announced that they have taken over California bank First Republic Bank and that it will be majority acquired by JPMorgan Chase to close the banking crisis that began in March.

San Francisco-based First Republic Bank is under severe pressure after the March bankruptcies of regional banks Silicon Valley Bank and Signature Bank raised fears of contagion for the rest of the system and spooked financial markets.

Excluding investment banks such as Lehman Brothers, it is the second largest bank by assets in US history, following the failure of Washington Mutual in 2008.

First Republic failed to come up with a viable bailout plan, disclosing last week that it had lost more than $100 billion in deposits in the first quarter, sending its shares plunging.

The officials tried to come up with a rescue plan.

One source said the federal government intervened through the Federal Deposit Insurance Corporation (FDIC) and the US Treasury, which contacted six banks last week to investigate their interest in purchasing First Republic’s assets.

The regulator FDIC, which guarantees bank deposits, said on Monday that it has adopted this measure to protect the accounts.

“To protect depositors, the FDIC will enter into an acquisition agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits and substantially all assets of First Republic Bank,” the regulator said in a statement. can go.”

This federal agency estimated the cost of covering First Republic’s losses to be around $13 billion.

As part of the settlement reached Monday morning, the California Department of Financial Protection and Innovation (DFPI) appointed the FDIC as receiver for the First Republic, which will be sold immediately to JPMorgan Chase.

DFPI reported that JPMorgan would accept “all deposits, including uninsured deposits and most assets.”

On Monday, all 84 First Republic offices in eight states will open as JPMorgan Chase bank affiliates, according to the FDIC.

“Our government invited us and others to take action, and we did,” JPMorgan Chief Executive Jamie Dimon said in a statement following the announcement.

The bank takeover and sale by authorities came two months after the Silicon Valley bank failure, which created a snowball effect of alarm among investors with fears for the health of the banking sector in the United States and Europe.

Days after Silicon Valley, the New York regional unit Signature Bank collapsed.

Amid stock market turmoil, Swiss banking giant Credit Suisse became a high-profile victim when it was forced by regulators to merge with rival UBS following a stock market collapse.

World Nation News Desk
World Nation News Desk
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