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JP Morgan to purchase ailing First Republic Bank

  • Märkte: Coal, Crude oil, LPG, Metals, Natural gas
  • 01.05.23

US bank JP Morgan Chase has agreed to purchase First Republic Bank after California regulators closed the troubled bank today and appointed the Federal Deposit Insurance Corp (FDIC) as its receiver, in the third US bank failure since March.

JP Morgan Chase submitted a bid for all of First Republic's deposits. First Republic's 84 offices in eight states will reopen today as branches of JP Morgan Chase, the FDIC said. First Republic's share price fell by about 75pc last week after it reported its deposits posted sharp losses in the first quarter.

The closure of First Republic and its takeover by JP Morgan comes as the Federal Reserve begins a two-day policy meeting on Tuesday widely expected to result in a quarter-point increase to its target rate on Wednesday. Fed watchers expect it may be the last hike in the current tightening cycle.

Fed chair Jerome Powell said after the last rate increase in March that the two bank failures early that month had resulted in tighter lending standards, essentially doing some of the Fed's credit tightening work for it.

As of 13 April, First Republic had about $229bn in total assets and $103.9bn in total deposits, FDIC said. It had ended 2022 with about $176bn in deposits. In addition to assuming all the deposits, JP Morgan Chase agreed to purchase "substantially" all of First Republic Bank's assets.

The FDIC and JP Morgan Chase are also entering into a loss-share transaction on single family, residential and commercial loans it purchased from First Republic Bank aimed at maximizing recoveries on the assets and minimizing disruptions for loan customers.

JP Morgan's takeover followed a "highly competitive" bidding process, FDIC said. FDIC estimates the cost to the Deposit Insurance Fund will be about $13bn.

The failure of First Republic followed the collapse in early March of Silicon Valley Bank in California and New York's Signature Bank. Switzerland's Credit Suisse collapsed days later and was purchased by rival UBS for about $3.3bn.

The Fed on 28 April released a review of the supervision and regulation of SVB that found SVB's directors and management "failed to manage their risks" and that Fed supervisors "did not fully appreciate the extent of the vulnerabilities" as SVB grew and failed to "take sufficient steps" to ensure the bank fixed those problems. The report calls for stricter oversight of banks.


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