Large U.S. banks, including JP Morgan and PNC Financial Services Group, have jumped into the race to acquire First Republic Bank, which is on the verge of bankruptcy, the Wall Street Journal reported on the 28th (local time).
On the same day, news of the imminent intervention of the U.S. financial authorities in First Republic Bank was reported, followed by the bidding competition of large banks.
Citing sources, the WSJ said JPMorgan and PNC are competing to participate in the acquisition process that will follow the U.S. federal government’s seizure of First Republic Bank. The U.S. Federal Deposit Insurance Corporation’s seizure and sale process is expected to begin as early as the 29th to the 30th.
First Republic, a local bank in San Francisco, was shaken by rumors of a regional bank crisis that spread after the bankruptcy of Silicon Valley Bank (SVB) on the 10th of last month. The collapse of SVB led to a “bank run (large-scale cash withdrawal)” of First Republic Bank customers, whose market capitalization has fallen by 97% over the past month.
Eleven large banks, including JP Morgan, began emergency blood transfusions of $30 billion to First Republic last month, but the situation did not improve.
In particular, the bank’s stock price fell more than 60% for two days after the announcement on the 24th that customer deposits plunged 40% ($72 billion) in the first quarter. Considering that the bank received $30 billion in liquidity from JP Morgan and others immediately after the SVB crisis, the actual amount withdrawn by customers is more than $100 billion.
The White House said in a briefing the previous day that it is continuing to monitor the situation at First Republic Bank and is ready to intervene immediately if necessary.
Meanwhile, the Federal Reserve (Fed), the U.S. central bank, said that the SVB crisis, which sent shock waves to the U.S. financial sector, was a combination of the Fed’s failure to supervise and the bank’s poor management.
The Fed officially admitted in its report that the Fed was responsible for the incident, saying the poor management system of SVB, loose government supervision and weak regulations caused the situation.
“The Fed did not recognize the significant seriousness in managing governance, liquidity and interest rate risks amid SVB’s asset size more than doubling between 2019 and 2022,” the report said.
