Biden reassures Americans about banking system

US President Joe Biden has addressed concerns about the safety of the country’s banking system following the seizure of First Republic Bank, which has been sold to JPMorgan Chase after experiencing financial difficulties. During a news conference at the White House, Biden assured the public that the banking system is “safe and sound”. He said the regulators’ decision to facilitate the sale would “ensure that all depositors are protected and that taxpayers are not on the hook”.

First Republic is the third major financial institution in the US to fail in two months. JPMorgan’s purchase aims to draw a line under recent concerns over a wider banking system crisis. The deal will cost FDIC’s Deposit Insurance Fund (DIF) approximately $13bn, according to the regulator’s initial estimate. JPMorgan is set to make a payment of $10.6bn to the US Federal Deposit Insurance Corp (FDIC) to take control of most of the assets of the San Francisco-based bank and gain access to First Republic’s wealthy client base.

The sale follows intense pressure on First Republic, which disclosed last week that it had suffered more than $100bn in outflows in the first quarter and was exploring options. The banking sector was already under stress after the closure of Silicon Valley Bank and Signature Bank in March, while Swiss lender Credit Suisse was bought by rival UBS in a state-engineered takeover.

JPMorgan was one of several interested buyers in First Republic, including PNC Financial Services Group and Citizens Financial Group. Sources familiar with the matter said that they had submitted final bids on Sunday in an auction being run by US regulators. The California Department of Financial Protection and Innovation said it had taken possession of First Republic, and the FDIC would act as its receiver.