Regulators Seize First Republic Bank and Sell a Portion of Assets to JPMorgan

Regulators seized First Republic Bank and sold a portion of its assets to JPMorgan Chase. This is the second-largest bank collapse in the country to date. 

JPMorgan Chase has taken possession of First Republic Bank’s $92 billion deposits and $203 billion loans and securities along with its 84 branches. The deal is projected to cause substantial losses for the bank’s shareholders.

Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase, stated that most midsize banks reported stabilized deposits and increased profits in the last week of April 2023, with the exception of the First Republic Bank.

Despite First Republic Bank’s efforts to sell off unprofitable assets, like the low-interest mortgages it offered to wealthy customers. Although the bank announced reducing the workforce by up to 25%, comprising almost 7,200 staff by late 2022, analysts said such measures were too late and insufficient. 

Following the handling of the First Republic Bank, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency, and the banking sector’s regulators will be subject to renewed scrutiny. The FDIC and the Federal Reserve conceded that their lax oversight contributed to the downfall of Signature Bank and Silicon Valley Bank.

There would be more questions raised on JPMorgan Chase’s size, with over $3 trillion in assets and is currently the biggest of the “too big to fail” businesses across the globe.

JPMorgan has portrayed the acquisition of the First Republic Bank as a favorable development for the economic system and the institution. The FDIC will share losses with JPMprgan on First Republic Bank’s loans as a part of the deal. As per the FDIC, the insurance fund is estimated to cause losses of nearly $13 billion due to the collapse of the First Republic Bank.

JPMorgan predicts a $500 million annual rise in net revenue due to the addition of First Republic Bank, but the bank also expects integration expenses of $2 billion in the next 18 months.

Suggested Reads:

Regulators Express Concerns On TD Bank’s AML Practices Leading to Merger Termination to Acquire First Horizon Bank

Estonia’s New AML/CFT Regulatory Regime Sparks 80% Downfall in Licensed Crypto Firms

The Cayman Islands Lead Overseas Delegations Discussing Actions to Be Removed From FATF’s Gray List