- The struggling US bank First Republic is being taken over by the financial group JP Morgan Chase.
- Initially, the US deposit insurance company FDIC will become the trustee of the institute.
- JP Morgan then takes over First Republic with all deposits and practically all assets in the next step.
This was announced by the California financial regulator DFPI. Shares in First Republic Bank were temporarily suspended from trading on Friday after falling more than 50 percent to a record low.
How much JP Morgan Chase paid for the First Republic is not yet known. It receives extensive security guarantees from the state authorities in the billions.
What is clear, however, is that the 84 branches of the regional bank, which is represented in eight US states, will open under the new name as early as Monday – even if the authorities are still managing them in trust for the time being.
Rising interest rates are becoming a problem
The First Republic has struggled with many customers withdrawing their money since the collapse of Silicon Valley Bank and Signature Bank. The background to the problems was the rapidly rising interest rates.
Despite an aid campaign by the largest US financial institutions in coordination with the Treasury Department and the Federal Reserve, the situation remained precarious.
The First Republic is already the third US bank that has recently found itself in existential difficulties because customers withdrew their deposits en masse. As a result, Silicon Valley Bank and Signature Bank collapsed in March.
Legend:
Investors sold shares in the bank en masse on Friday, after which the stock market crashed.
Reuters/Archives/Loren Elliott
In a concerted action, major banks initially put $30 billion into First Republic Bank, which was also reeling, to rescue them. Earlier last week, however, it disclosed a deposit outflow of more than $100 billion in the first quarter. Therefore, she had to take advantage of liquidity assistance from the US Federal Reserve.