The US regulators were working late on Sunday night to resolve the First Republic Bank crisis after a midday deadline had passed for submitting final bids to take over the bank.
According to people who know the matter, the FDIC or Federal Deposit Insurance Corp. asked banks, including PNC Financial Services Group Inc., JPMorgan Chase & Co., and Citizens Financial Group Inc., to submit offers.
Bloomberg also reported that the regulators were asking follow-up questions to some of the bidders. This was as they compared the proposal of the banks. However, if no agreement could be reached, regulators could have the option to seize the bank and take ownership of the First Republic Bank.
After weeks of fruitless talks between banks and their advisers, regulators started the bidding process. So, this could pave the way for a cleaner sale of First Republic Bank than the auctions that had followed the failures of SVB and Signature Bank the previous month.
Authorities step in after a particular drop in the Bank’s stock over the last week. This is now down 97 percent this year. It is unclear whether regulators may use a bid for the open-bank solution that avoids formally declaring the bank a failure and seizing it.
The stock went down, and thus it left the bank with a $650 million market value which made such a takeover almost possible.
Other associated factors
But finances are not the only hurdle to do a deal. JPMorgan is one of the largest banks. It has already amassed above 10 percent of nationwide deposits. Thus, making the bank ineligible under US regulations to take over another deposit-taking institution. On Friday evening, the Federal Deposit Insurance Corp. had still to decide on putting the bank into receivership.
The First Republic’s balance sheet shows a mountain of low-interest loans. This also included a large portfolio of huge mortgages to wealthy clients. Such debts have lost value in the middle of interest-rate hikes. This left the bank to face losses if forced to sell them.
Eleven banks deposited $ 30 billion into the First Republic in March. The bank got some time to find a private-sector solution. Some proposals came in very recent days that called for some banks to buy assets from the bank for more than their market prices. However, no agreement materialized.
However, some big firms were waiting for the government to offer aid. Or to put the bank in receivership. But, receivership is an outcome the Federal Deposit Insurance Corp may prefer to avoid. This is because the prospect can greatly hit its deposit insurance fund.
Reuters reported that JPMorgan Chase & Co, PNC Financial Services Group, and Citizens Financial Group Inc were some banks that submitted final bids for The First Republic Bank. This was on Sunday. It was in an auction by the U.S. regulators. This was according to sources familiar with the matter. The Federal Deposit Insurance Corp expected to announce a deal on Sunday night.
The First Republic Bank was the fourteenth largest lender in the U.S.A. According to Fed data, it is larger than SVB and was ranked seventeenth and Signature twenty-ninth.
About the First Republic Bank
First Republic Bank is a commercial bank. It is the provider of wealth management services. And it has its headquarters in California. The bank caters to high-net-worth individuals and has 93 offices in eleven states.