Stock prices plunged again on news that financial authorities are imminent to intervene in the First Republic Bank, which has been embroiled in rumors of a crisis.
On the 28th (local time), First Republic Bank closed at $3.51, down 43.3% from the previous day. However, the stock price remains in the USD 2 per share range as it plunged again in after-hours trading. Shares of First Republic Bank exceeded $140 earlier this year alone. In four months, the stock price has virtually become a piece of waste.
Expectations that the U.S. government will eventually intervene to save First Republic lowered stock prices. In fact, Reuters reported citing sources that the U.S. Federal Deposit Insurance Corporation (FDIC) has started preparing to manage First Republic Bank. “(Financial authorities) have determined that the situation at First Republic Bank has worsened and that there is no more time to pursue relief through the private sector,” the source said. Earlier, CNBC also reported that FDIC is most likely to be the bankruptcy trustee of First Republic Bank.
The U.S. Silicon Valley Bank (SVB), which went bankrupt last month, was also on the verge of bankruptcy due to the bank run (large-scale cash withdrawal), and the FDIC was appointed as a bankruptcy trustee. If First Republic Bank enters the FDIC’s management system, it is highly likely that it will take a forced sale procedure afterwards. Earlier, SVB was also closed immediately, and the sale process proceeded under FDIC management.
However, the Wall Street Journal (WSJ) reported that large banks such as JP Morgan and PNC Financial Services Group are competing to participate in the acquisition of First Republic. Uncertainties surrounding government intervention and large acquisitions seem to be pressing First Republic Bank.
Meanwhile, the U.S. Federal Reserve (Fed) previously admitted to failing to supervise the SVB bankruptcy. The Fed said in a report led by Michael Barr, vice chairman of financial supervision, that SVB’s extremely poor management system, loose government supervision and weak regulations caused the situation at the time. In other words, the Fed officially admitted that it was responsible for the SVB crisis.
