First Republic Bank is on the verge of collapse: Report

April 30, 2023
Robert Ayers

Experts are predicting that First Republic Bank is going to be the next bank to be seized by the federal government. The seizure, in fact, appears imminent. 

The latest reports on the matter come from Bloomberg News and the Wall Street Journal. 

What's going on?

There have been concerns about First Republic ever since the collapse, in March, of Silicon Valley Bank (SVB). And, that's because the two banks appeared to have the same problem.

The problem, according to Breitbart News, is that "the bank had funded many long-term assets with very low yields with less-stable sources of funding, including a high percentage of deposits larger than the amount insured by the [Federal Deposit Insurance Corporation (FDIC)]."

After the collapse of SVB - when it was realized that First Republic could suffer the same fate - First Republic received $30 billion in deposits from other banks as part of a new lending program created by the government. But, apparently, it hasn't been enough.

Although the deposits allowed First Republic to survive for the last six weeks, the bank's latest quarterly financial report showed that the bank's customers had withdrawn about 41% of their money from the bank, which was reportedly about $100 billion. And, a problem is that most of the withdrawals were uninsured by the FDIC because the withdrawals were from accounts with more than $250,000 in them.

Accordingly, concerns about First Republic's viability continue. And, the bank's shares have dropped from $122.50 at the beginning of March to $3 as of Friday.

The latest

Now, it is expected that the FDIC will step in and take control of First Republic, as it has already done with SVB and Signature Bank.

In addition to this, two other banks have submitted bids to the FDIC to buy First Republic, namely JPMorgan Chase and Pittsburgh-based PNC Financial.

It's unclear where the matter currently stands.

First Republican has released a statement, saying, "We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients."

At the time of this writing, however, none of the other entities who are involved have released statements.

What now?

Experts are predicting that an announcement is likely imminent indicating that the FDIC has taken the First Republic with the intent to sell either the bank itself or the bank's assets to another, more reliable bank.

If First Republic does end up being purchased, it is expected that the FDIC will still be stuck with some of its money-losing assets.

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