With a fresh push, JPMorgan Chase is set to acquire assets of struggling First Republic Bank. The development emanated after numerous attempts by the American banking giant to rescue the struggling bank. Late last month, JPMorgan Chase alongside other top banks tabled official bids to acquire assets belonging to First Republic Bank.
Consequently, after a successful bid, JPMorgan Chase signed a purchase and assumption agreement with the Federal Deposit Insurance Corporation. By the agreement, JPMorgan Chase will assume the role of protecting FRB depositors. However, the latest development surfaced today, after the California Department of Financial Protection and Innovation shut down First Republic Bank. Thereafter, the department signed an agreement that saw the Federal Deposit Insurance Corporation (FDIC) as the receiver.
Additionally, the agreement between JPMorgan Chase and the FDIC will see the banking giant assume all assets belonging to FRB with uninsured deposits inclusive. The takeover will see 84 branches of FRB reopen as JPMorgan Chase in eight states. Thereafter, depositors of the struggling bank will be transferred to the JPMorgan system, providing them with pathways to their deposits. Also, the new development will see the FDIC provide insurance cover for all deposits belonging to the affected customers.
More so, the FDIC and JP Morgan agreed to a loss-sharing pact on residential and commercial loans obtained by First Republic Bank. This implies that the entities will share losses and recover on loans protected by the loss-share deal. The FDIC will take apart due to its status in the deal as a receiver. Presently, the First Republic Bank has about $229.1 billion worth of assets under its management. Also, the struggling bank has another $103.9 billion worth of customers deposit.
Genesis of FRB’s struggles before the intervention of JPMorgan Chase
The United States banking sector is experiencing somewhat of some turmoil in 2023. Since the start of the year, leading banks like Silicon Valley Bank and Silvergate, Signature Bank have collapsed. FRB joined the list as a result of the struggles it encountered last month.
Things began to go sore for FRB on April 26 when reports about government receivership hit the media space. Due to that, the shares of FRB plummeted by 20% within a few hours. The reports set the track for the bank’s struggles compelling regulators to shut down the bank a few days later.
As a result of the shutdown, depositors were unable to access their funds. Now, the intervention from JPMorgan Chase will cover the lapses. Lastly, customers will be able to carry out transactions at any branch of FRB, until JPMorgan says otherwise.