Major Banks Bid for First Republic Bank
Sources familiar with the matter reported that PNC Financial Services Group (PNC.N), JPMorgan Chase & Co (JPM.N), and Citizens Financial Group Inc (CFG.N) were among the banks that submitted final offers for First Republic Bank (FRC.N) in an auction supervised by U.S. regulators on Sunday, April 30th.
Sale of First Republic Bank Approaches Decision Point
According to a source familiar with the matter, the bidding process for First Republic Bank continued into Sunday evening with regulators asking bidders to revise their bids and provide more specific details on the assets they were bidding for. Despite this, the source suggested that a decision was imminent.
Sources reported on Saturday that US regulators were attempting to sell First Republic Bank over the weekend, with around six banks making bids.
Potential First Republic Bank Deal May Require Government Support
In less than 2 months, Silicon Valley Bank, Signature Bank and now First Republic failed due to people withdrawing their deposits from US banks. Although things have now settled down, the amount of government support required for a deal on First Republic Bank would still be closely monitored.
The FDIC typically insures deposits up to $250,000, but in response to the fear of more bank runs, regulators opted to insure all deposits at both Silicon Valley Bank and Signature Bank, which was an exceptional step.
The regulators will have to take permission by the Treasury secretary, the president and super-majorities of the boards of the Federal Reserve and the FDIC if they plan to insure full deposit similar to the other two banks.
JPMorgan’s Potential Acquisition of First Republic Bank
JPMorgan currently has more than 10% of the total bank deposits in the country. While federal law prohibits a large bank from acquiring another bank if it would result in them surpassing a 10% threshold of total deposits, this restriction can be waived by banking regulators if the purchase is for a failed bank. The 1994 law and its interpretation were confirmed by an expert source on bank failures.
