The Californian financial regulator has taken possession of #FirstRepublicBankBank, marking the third failure of an American bank since March. #jpmorganchaseChase acquired all of First Republic’s deposits, including uninsured deposits and a “substantial majority of assets,” according to a release. The California Department of Financial Protection and Innovation said it had taken possession of the bank and appointed the Federal Deposit Insurance Corporation as the receiver, which accepted JPMorgan’s bid for its assets.

Since the sudden collapse of Silicon Valley Bank in March, attention has been focused on the First Republic as the weakest link in the US banking system. Like SVB, which catered to the tech startup community, First Republic was a California-based specialty lender focused on serving wealthy coastal Americans by offering low-rate mortgages in exchange for cash deposits. But that model unraveled in the wake of the SVB collapse, and First Republic’s clients withdrew more than $100 billion in deposits, making it vulnerable to a bank run.

That deposit drain forced First Republic to borrow heavily from Federal Reserve facilities to maintain operations, which pressured the company’s margins because its cost of funding is far higher now. According to BCA Research chief strategist Doug Peta, First Republic recently accounted for 72% of all borrowing from the Fed’s discount window.

On April 24, First Republic CEO Michael Roffler sought to portray an image of stability after the events of March. Deposit outflows have slowed in recent weeks, he said. But the stock tanked after the company disavowed its previous financial guidance, and Roffler opted not to take questions after an unusually brief conference call.

The #collapse of Silicon Valley Bank and now First Republic has raised concerns about the stability of the US banking system. The failure of First Republic is a reminder that banks with a high proportion of uninsured deposits are vulnerable in a crisis. The loss of First Republic will also ripple effect on the #realestate market, which has benefited from the bank’s low-rate mortgages.

In conclusion, the collapse of First Republic Bank is a stark reminder that even banks that cater to wealthy Americans can fail in a crisis. The failure of the First

Republic and Silicon Valley Bank has raised concerns about the US banking system’s stability, underscoring the importance of #regulating banks to prevent future collapses. The failure of the First Republic will also significantly impact the real estate market and serves as a warning to those who may underestimate the risks associated with high-rate mortgages.

#bankfailure #usa