First Republic: JP Morgan to take over major US bank

JP Morgan Chase is acquiring First Republic Bank, which recently collapsed, with the approval of regulators. The Federal Deposit Insurance Corporation confirmed the collapse of the San Francisco-based bank and JP Morgan will take over its deposits and most of its assets. First Republic Bank is the third US bank to fail in recent months, causing concerns about a wider banking crisis. The bank’s shares plummeted by more than 75% after it revealed that customers had withdrawn $100bn in deposits in March. Silicon Valley Bank and Signature Bank have also recently collapsed.

US officials reached out to six banks in an effort to find a rescue package for First Republic Bank, with JP Morgan Chase and others being invited to step up and help, according to CEO Jamie Dimon. The acquisition will have a modest benefit for JP Morgan and be complementary to its existing business. The bank will acquire $173bn in loans, around $30bn in securities and $92bn in deposits from First Republic, with the FDIC sharing loan losses with JP Morgan. The bank’s 84 branches in eight states will reopen as branches of JPMorgan Chase Bank on Monday. The Federal Reserve has had to intervene with emergency measures to stabilise financial markets after a deposit flight from some lenders in recent months. Despite efforts by America’s biggest banks to invest $30bn in First Republic in March, it was not enough to save the mid-sized lender that catered to wealthy clients.

After the collapse of Silicon Valley Bank and Signature Bank, the FDIC guaranteed all deposits to prevent a run on the banks. Credit Suisse was acquired by UBS in a deal orchestrated by Swiss authorities. As central banks around the world raised interest rates to combat inflation, some lenders have struggled due to the decreased value of their portfolios of bonds purchased when rates were lower. However, the current situation is not comparable to the 2008 financial crisis as there isn’t a similar system-wide issue where banks were exposed to bad investments in the US housing market. This crisis resulted in massive government bailouts and a global recession.

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