Treasury says UK banking system 'safe' after First Republic bank failure in US

It is the second biggest bank failure in US history, behind only Washington Mutual, which collapsed at the height of the 2008 financial crisis and was also taken over by JPMorgan.

It has struggled since the collapse of Silicon Valley Bank and Signature Bank, and investors and depositors had grown increasingly worried that it might not survive because of its high amount of uninsured deposits and exposure to low interest rate loans.

The Federal Deposit Insurance Corporation said early on Monday that First Republic Bank’s 84 branches in eight states will reopen on Monday as branches of JPMorgan Chase Bank.

“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman and CEO of JPMorgan Chase.

“Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimise costs to the Deposit Insurance Fund.”

Regulators worked throughout the weekend to find a way forward before US stock markets opened.

As of April 13, First Republic had approximately 229 billion US dollars (£182.2 billion) in total assets and 104 billion dollars (£82.7 billion) in total deposits, the FDIC said. At the end of last year, the Federal Reserve ranked it 14th in size among US commercial banks.

Before Silicon Valley Bank failed, First Republic had a banking franchise that was the envy of most of the industry.

Its clients – mostly the rich and powerful, reportedly including Meta Platforms chief executive Mark Zuckerberg – rarely defaulted on their loans.

First Republic saw total assets more than double from 102 billion dollars (£81.2 billion) at the end of 2019’s first quarter, when its full-time workforce was 4,600.

But the vast majority of its deposits, like those in Silicon Valley and Signature Bank, were uninsured – that is, above the 250,000 dollar (around £198,885) limit set by the FDIC – which concerned analysts and investors.

If First Republic was to fail, its depositors might not get all their money back.

Those fears were crystalised in the bank’s recent quarterly results.

The bank said depositors pulled more than 100 billion dollars (£79.6 billion) out of the bank during April’s crisis.

San Francisco-based First Republic said it was only able to stanch the bleeding after a group of large banks stepped in to save it with 30 billion dollars (£23.9 billion) in uninsured deposits.

Since the crisis, First Republic has been looking for a way to quickly turn itself around.

The bank planned to sell off unprofitable assets, including the low interest mortgages that it provided to wealthy clients.

It also announced plans to lay off up to a quarter of its workforce, which totalled about 7,200 employees in late 2022.