Tuesday, June 6, 2023
HomeU.S.BankFederal regulators race to seize and sell First Republic Bank

Federal regulators race to seize and sell First Republic Bank

A source with knowledge of the situation told media that federal regulators are rushing to seize and sell First Republic Bank this weekend.

A takeover of the troubled regional bank would be part of a larger endeavour by the federal government to halt the banking crisis sparked by the collapse of Silicon Valley Bank last month.

The FDIC could seize control of First Republic Bank and swiftly dispose of its assets to another private bank as one option. Or, if no agreement is reached with a private bank, the FDIC may have to acquire First Republic outright.

It is unknown whether the FDIC would make all uninsured deposits whole in this second scenario, as it did with SVB and Signature Bank. Officials from the Treasury Department and Federal Reserve would likely need to approve a plan to cover First Republic’s uninsured deposits by designating it a “systemic risk exception,” as they did with the two other failed banks in March.

Typically, regulators aim to finalise acquisition agreements prior to Sunday evening, when Asian financial markets reopen.

Last week, First Republic Bank’s stock declined approximately 75% after it disclosed that consumers withdrew more than $100 billion in deposits during last month’s banking sector turmoil. March’s $30 billion rescue package for First Republic from 11 of the nation’s largest banks was insufficient to assuage investors’ concerns regarding the bank’s financial stability.

According to Federal Reserve data, First Republic Bank, headquartered in California, was the fourteenth largest commercial bank in the United States at the end of 2022.

In light of coordinated regulatory action taken last month, senior U.S. officials assert that the American banking system is safe and resilient.

“Americans can rest assured that our banking system is safe,” President Joe Biden said in a statement last month. “Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed.”

The FDIC and First Republic declined to comment.

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