JPMorgan buys First Republic Bank after FDIC shutdown

In order to react to the situation of the First Republic Bank in difficulty, the American banking giant JPMorgan will acquire its assets after several attempts to save the bank have failed. On April 29, JPMorgan and many other banks have submitted offers to take over the assets of the FRB. The California Department of Financial Protection and Innovation eventually closed the bank on May 1, naming the FDIC (Federal Deposit Insurance Corporation) as liquidator. Therefore, the FDIC has entered into a buy-and-hold agreement with JPMorgan to protect depositors.

Transition of the First Republic Bank: from crisis to recovery

JPMorgan will assume all assets of the First Republic Bank, including $229.1 billion in assets and $103.9 billion in deposits. As part of the acquisition, 84 branches of First Republic Bank across eight states will reopen under the brand JPMorgan Chase. FRB depositors will become customers of JPMorgan, with their total deposits insured by the FDIC. Customers will be able to continue to use their current branches for banking services until they receive official notification of the change from JPMorgan.

Loss Sharing Agreement: Mitigating Risks for JPMorgan

In addition to the transfer of assets, a loss sharing agreement has been established between the FDIC and JPMorgan regarding residential and commercial loans acquired by the FRB. This agreement stipulates that all losses and recoveries on covered loans will be divided between the FDIC, as liquidator, and JPMorgan. This arrangement mitigates potential financial risks for JPMorgan in absorbing FRB’s assets.

The real problems for First Republic Bank began on April 26, when news of a possible government conservatorship emerged. With its bankruptcy, the FRB joined the Silicon Valley bank and the Signature Bank as the last US banks to collapse in 2023.

The article JPMorgan buys First Republic Bank after FDIC shutdown appeared first on Corner Academy

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