The regulatory services of the United States have announced this Monday that JPMorgan has bought the assets of the First Republic bank after its intervention and closure “to protect depositors”, after becoming the third entity to fail in just two months in the North American country.

“First Republic Bank, of San Francisco, California, has been closed today by the California Department of Financial Protection and Innovation, which has appointed the Federal Deposit Insurance Corporation (FDIC) as receiver,” according to a statement published by the FDIC itself, which adds that “to protect depositors” it has proceeded to sell assets to JPMorgan Chase.

JPMorgan will “assume all of First Republic Bank’s deposits” and “substantially all of its assets” after submitting an offer to take over all of First Republic’s deposits. “As part of the transaction, First Republic’s 84 offices in eight states will reopen as branches of JPMorgan Chase, beginning today and during business hours,” it specified.

The FDIC has noted that “all First Republic depositors will become JPMorgan Chase depositors and will have full access to all of their deposits” at their current branch until the system changes are complete, while stressing that “deposits will remain FDIC insured and customers do not have to change their banking relationship to retain deposit insurance coverage up to applicable limits.”

The FDIC has also explained that both the agency and JPMorgan “enter into a transaction of shared losses on single-family, residential and commercial loans that it acquired from the former First Republic.” “The FDIC, as servicer, and JPMorgan will share losses and potential recoveries on loans covered by the loss-sharing agreement,” it said.

This is expected to “maximize the recovery of assets by keeping them in the private sector,” while adding that “the transaction is also expected to minimize disruption to loan clients.”

Finally, it has indicated that the decision “has involved a highly competitive bidding process” and “has resulted in a transaction consistent with the minimum cost requirements of the Federal Deposit Insurance Act. “The FDIC estimates that the cost to the Fund Deposit Insurance will be around 13,000 million dollars (around 11,821 million euros). This is an estimate, and the final cost will be determined when the FDIC terminates the receivership.”

Source: dpa

(Reference image source: Mariia Shalabaieva, Unsplash)

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