The Federal Deposit Insurance Corp. (FDIC) on Sunday was appointed the receiver of First Republic Bank in San Francisco. The FDIC entered into an agreement with JPMorgan Chase to acquire First Republic’s assets.
JPMorgan Chase CEO Jamie Dimon said the outcome was very good for everyone.
“It is how the system is meant to work,” Dimon said. “Hopefully this mini-bank crisis is over.”
However, analysts speculated the bank’s collapse could lead to other lenders tightening credit. Tan Kai Xian, a U.S. analyst for Gavekal Research, said First Republic’s failure could raise the cost of interbank loans and cause other lenders to tighten credit.
Bank of America Securities analyst Ebraham Poonawala said the acquisition “should likely end forced sales of banks due to deposit flight.”
JPMorgan Chase will assume all First Republic’s deposits, insured and uninsured. The agreement means the government did not have to choose whether to create a special exemption for protecting uninsured deposits, as it did after the collapse of Silicon Valley Bank and Signature Bank.
“Our government invited us and others to step up, and we did,” Dimon said. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
