First Republic attempts last-ditch rescue pact 2023

In a deal that could be disclosed as early as Sunday, US regulators are scrambling to find a buyer for First Republic Bank.

The Federal Deposit Insurance Corporation reportedly urged six banks to submit bids for the troubled financial institution.

First Republic’s stock price plummeted last week after it disclosed that consumers had withdrawn $100 billion in deposits in March.

At the time, Silicon Valley Bank’s competitor had failed, sparking concerns of a widespread banking crisis.

The collapse of SVB was quickly followed by the failure of another US financial institution, Signature Bank.

The Federal Deposit Insurance Corporation (FDIC), an American financial regulator, reportedly solicited proposals for First Republic by the end of last week and evaluated them over the weekend.

According to Reuters, investment banking behemoth JP Morgan Chase is believed to be one of the banks invited to bid on First Republic. Bank of America has reportedly also been contacted.

Bank of America and JP Morgan declined to comment. Contact has been made with the FDIC for comment.

Last month, problems at Silicon Valley Bank heightened concerns about the global banking industry.

Over the past year, central banks around the globe have sharply increased interest rates in an effort to reduce the rate of inflation.

It has diminished the value of the large portfolios of bonds that banks acquired when interest rates were lower, causing concern that other businesses may face similar circumstances.

Simultaneously in Europe, the Swiss banking colossus Credit Suisse, which had been plagued by its own problems for several years, announced that it would need to borrow $54 billion from the country’s central bank in order to stabilize its finances.

Credit Suisse has been rescued by its long-time rival UBS.

First Republic, like Silicon Valley Bank, is a mid-sized US lender. Eleven US institutions stepped forward in March to inject $30 billion into First Republic in an effort to stabilize the company. Among them was JP Morgan.

Last week, however, the bank’s investors were shaken when First Republic disclosed the amount of deposits withdrawn in March.

First Republic’s clients include affluent individuals whose funds could be at risk if a buyer cannot be found. The FDIC insures deposits up to $250,000 in the United States.

When Silicon Valley Bank and Signature failed, the FDIC guaranteed all deposits to prevent a “run on the bank,” also known as a stampede to withdraw funds.

If the FDIC is unable to locate a buyer for First Republic, it may take comparable action.

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About the Author: Sanjh Vishwakarma

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