JPMorgan has agreed to purchase First Republic Bank—winning an auction over the weekend to purchase its deposits and assets after the bank’s near collapse.
Key Details
- Following the climatic collapses of Silicon Valley Bank and Signature Bank in March, First Republic Bank became the third major collapse of the past two months when regulators ceased it on Monday.
- The seizure comes a week after First Republic’s quarterly report noted last Monday that the bank had lost $100 billion in deposits.
- The Federal Deposit Insurance Corporation stepped in on Monday after exhausting private solutions to the bank collapse.
- JPMorgan agreed to take possession of the bank’s assets and deposits, with CEO Jamie Dimon saying, “this part of the crisis is over.”
- The bank expects that the purchase will add $500 million to its annual net income, at the cost of $2 billion to integrate First Republic into JPMorgan within 18 months, AP reports.
- The collapse of First Republic has eclipsed Silicon Valley Bank as the second-largest U.S. bank collapse of all time at $229.1 billion.
Why It’s Important
The economy remains unstable, and the precipitous March banking crisis played a role in destabilizing the market further, affecting deposits with other banks and creating a cascade effect. The problems that created the collapse—high-interest rates, low bond yields, etc.—are still very much in play, which suggests that a fourth or fifth major bank collapse this year is still possible.
JPMorgan’s bid to purchase First Republic is, in part, an attempt to clear the ongoing turmoil and calm fears about the overall health of the financial system. Dimon notes that a crisis is still possible but unlikely to be on the scale of the prior collapses. “There may be another smaller one, but this pretty much resolves them all. This part of the crisis is over.”
Notable Quote
“The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families,” says a spokesman for the Treasury Department.
