US regulators are reportedly scrambling to find a rescuer to buy First Republic Bank after it admitted that customers had withdrawn $100bn in deposits in March, causing shares in the embattled lender to plummet last week. The Federal Deposit Insurance Corporation (FDIC) has reportedly asked six banks to bid for the struggling lender and is said to be assessing the bids over the weekend. A deal could be announced as soon as Sunday.
Silicon Valley Bank’s (SVB) failure last month, followed by that of Signature Bank, triggered fears of a wider banking crisis. The FDIC sought bids for First Republic by the end of last week, and investment banking giant JP Morgan Chase is believed to be one of the banks invited to bid for the mid-sized US lender. Bank of America is also understood to have been approached.
Concerns about the global banking industry have been gathering pace as problems at SVB emerged, and central banks around the world have been sharply raising interest rates over the past year to dampen the rate of inflation. This has hurt the values of the large portfolios of bonds bought by banks when rates were lower, raising concerns that other firms faced similar situations.
Like SVB, First Republic is a mid-sized US lender. In March, a group of 11 US banks stepped forward to pump $30bn into First Republic in an attempt to stabilise the business. However, investors in the bank were rattled last week when First Republic disclosed the amount that depositors had pulled from the lender in March.
First Republic counts wealthy individuals among its clients whose money is potentially at risk if a buyer is not found. In the US, the FDIC insures deposits up to $250,000. When SVB and Signature collapsed, the FDIC stepped in to guarantee all deposits to prevent a run on a bank. If it is not able to find a buyer for First Republic, the FDIC could take similar actions.
JP Morgan and Bank of America have declined to comment, and the FDIC has not provided any comment on the matter.
