The FDIC is trying to sell the troubled First Republic Bank, and the time for a deal is running out.
JPMorgan Chase, PNC Financial Services Group, and Citizens Financial Group have all put forward offers to acquire the struggling lender, reports from various sources indicate. An official decision has yet to be made.
Neither the FDIC nor the first Republic Bank publicly stated that they had submitted their bids, and the process is still being conducted privately. Bank of America Corp. and US Bancorp were also asked to bid, but both decided to not participate.
The FIDS has given bidders until Sunday afternoon to submit offers. And has been seeking more information from some of them. If no deals are made, the FDIC will have to take control of First Republic Bank and place it in receivership. People who have up to $250,000 in the bank could only get their money back if the government provides a rescue package.
The First Republic drew in a lot of wealthy clients by offering good deals on mortgages and loans, and as a result, 68 percent of their depositors are not insured.
JP Morgan already has more than 10 percent of US bank deposits, which is not allowed by federal laws. However, this limit is waived if they take over a failed bank.
The crisis of the American banking
The collapse of First Republic Bank came after two months of difficulty for other American banks. Silicon Valley Bank and Signature Bank were put into receivership by the FIDC and Silvergate Bank announced voluntary liquidation.
First Republic was founded in 1985 and was acquired by Merrill Lynch in 2007. The bank’s shares were re-listed publicly after Bank of America acquired Merrill following the 2008 financial crisis. The bank’s troubles began earlier this year with the crisis in other banks.
It received a $30 million lifeline from a consortium of 11 large banks, including JPMorgan Chase, PNC, and Bank of America. This was not enough to keep the bank afloat. In its latest financials, First Republic disclosed that customers withdrew $102 million in three weeks in March.
By the end of last year, outflows had risen to $176 million. On Friday, the publicly listed shares of First Republic plummeted, with the bank’s value dropping from $20 billion to $557 million. This showed that investors had lost faith in the bank’s performance and it could no longer avoid collapse.
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