JPMorgan will take over the management of the American First Republic Bank, which found itself in a crisis situation.
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The media reports that the process of transferring control of the troubled financial institution will be carried out as part of a deal that will be concluded through the mediation of regulators.
The Federal Deposit Insurance Corporation (FDIC) confirmed in a statement that First Republic had failed. Investment banking giant JPMorgan will take over all deposits and virtually all assets of a financial institution that failed to survive difficult times.
After the official announcement of the collapse, First Republic becomes the third major representative of the American banking sector that has gone bankrupt in recent months.
The shares of the failed lender fell in price by more than 75% last week. This happened after the financial institution reported that in March, customers withdrew $100 billion from deposit accounts.
Uncertainty, which has reached a critical level, has formed in the American banking sector after the collapse of the Silicon Valley Bank in March this year. This event has caused widespread fears that a single case will provoke something like a chain reaction and form a negative trend on a large scale. The situation worsened after the subsequent collapse of another American lender, Signature Bank.
Against the background of excessive outflow of deposits, the Federal Reserve System and the US Central Bank were forced to take emergency measures to stabilize the situation in the financial markets.
In March, a group of major American banks announced an initiative to inject $30 billion into First Republic as part of efforts to stabilize the business, but these actions did not bring the desired result.
First Republic was founded in 1985. This financial institution is a medium-sized lender.
As part of the agreement with First Republic, the insurance corporation will share the loan losses with JPMorgan. The FDIC estimated that as a result of this transaction, its insurance fund will decrease by about $13 billion.
A network of 84 First Republic offices in eight states will reopen as JPMorgan Chase branches.
