The US Federal Deposit Insurance Corporation (FDIC) has accepted JPMorgan Bank’s bid to buy the seized First Republic Bank in a deal aimed at quelling renewed weakness in the country’s banking industry.
In a statement issued early Monday, the Federal Deposit Insurance Corp. said that all depositors of First Republic Bank, both insured and uninsured will become depositors of JPMorgan and will have full access to their deposits.
The FDIC did not disclose what JPMorgan is paying to purchase First republic but said the deal involved a “highly competitive bidding process.”
Under the deal, JPMorgan acquires “substantially all” First Republic assets and agrees to assume responsibility for all of its deposits, including those above the federal insurance limit of $250,000 per account.
First Republic had about $229.1 billion in assets and $103.9 billion in deposits with many uninsured as they were above the limit.
It was the 14th biggest lender in the U.S. at the end of last year, larger than Silicon Valley bank which collapsed in early March. First Republic has struggled since the collapse of SVB which ranked 16th.
Like SVB, First Republic was plunged into trouble as US Fed began raising rates in the bid curtail surging inflation.
The bank’s quarterly results showed that depositors pulled over $100 billion out of the bank.
Federal regulators approached JPMorgan about bidding on First Republic’s assets, said Jeremy Barnum, JPMorgan’s chief financial officer. He told reporters on Monday that the bank “did not seek out this deal.”
JPMorgan in a statement said it is not assuming First Republic’s corporate debt or preferred stock.
First Republic’s 84 offices in eight states will reopen as branches of JPMorgan, and depositors will be able to access all of their money when they open Monday.
JP Morgan was among the group of banks that stepped in March to rescue First Republic with a pool fund of $30 billion.
First Republic’s failure is expected to cost the FDIC about $13 billion, according to the agency. It said the money will come from the FDIC’s deposit insurance fund, which insured banks pay into every quarter.
First Republic shares have lost 97% of its value falling to $3.51 on Friday from over $144 in January.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.
