First Republic Bank snapped up by JPMorgan

First Republic Bank has been seized by regulators, in what is the second largest bank failure in US history. JPMorgan Chase bought all of its deposits and most of its assets, in an effort to curb the crisis that has brought concerns over the health of the US banking system. The bank had 84 branches, all of which opened on Monday as JPMorgan Chase branches. The takeover means First Republic’s shareholders are likely to lose their investments. The failure of the bank comes as the third midsize bank to collapse in less than two months. The only larger bank failure in US history was Washington Mutual, which JPMorgan also took over in a similar government-orchestrated deal during the 2008 financial crisis.

Before this year, First Republic was one of the most highly regarded banks in the industry. Its clients were almost exclusively wealthy, and were attracted by low-cost mortgages and attractive savings rates. The business model, which catered to the rich, became a liability with the collapse of Silicon Valley Bank and Signature Bank. These banks had uninsured deposits, which were quickly pulled out when trouble began. Customers with large accounts at First Republic also began withdrawing their money at the first sign of trouble.

Last month, a coalition of a dozen banks put together a $30bn funding package for First Republic, which for a time seemed to be successful in stemming the flow of deposits out of the bank. However, it became increasingly clear that the bank was on borrowed time and needed to find a buyer or alternative funding to replace the lost deposits. Plans were put in place to sell unprofitable assets and lay off staff, but these were considered too little, too late.

The failure of First Republic Bank has led to criticism of the Federal Reserve, FDIC and Office of Comptroller of the Currency, which regulate the banking industry. They have acknowledged that their lax supervision contributed to the failures of Silicon Valley Bank and Signature Bank. JPMorgan Chase, the US’ largest bank, has stepped in once again, as it did during the 2008 financial crisis, to take over First Republic. While JPMorgan said the deal was beneficial to both the financial system and the company, there are concerns over the size of JPMorgan, which by law would not be allowed to buy First Republic if it had not failed.