The American First Republic Bank is being prepared for transfer to foreign management — Reuters
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The Federal Deposit Insurance Corporation of the USA (FDIC) is preparing to introduce a temporary administration at First Republic Bank in the near future. This was reported by Reuters, citing a source familiar with the situation.
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Falling shares
The bank’s shares fell by 43%, which intensified the stock market fall, which destroyed 75% of its value this week. At its lowest level, the bank’s market capitalization amounted to almost $557 million, which is far from its peak estimate of more than $40 billion in November 2021.
The banking regulator has decided that the situation of the troubled regional lender has worsened, and there is no more time for rescue through the private sector.
If the creditor from San Francisco undergoes the procedure of temporary administration, it will be the third American bank that has gone bankrupt since March. This week, First Republic said that its deposits fell by more than $100 billion in the first quarter.
Read also: The largest US banks allocate $30 billion to rescue First Republic Bank
Major banks, including JPMorgan Chase&Co and PNC Financial Services Group, are competing to buy First Republic. It is expected that the external management of the bank may be introduced this weekend.
First Republic, which released its first-quarter earnings on Monday, said it plans to reduce its balance sheet and reduce expenses by cutting executive compensation, reducing office space and laying off 20% to 25% of employees in the second quarter.
Read also: Why are banks going bankrupt again and who will actually pay for it?
Against the background of the collapse of two American banks, Silicon Valley Bank (SVB) and Signature Bank, clients began to massively withdraw funds from First Republic, and the S&P Global Ratings and Fitch Ratings agencies lowered the bank’s ratings to the level of the speculative category.
It is worth noting that Silicon Valley Bank and Signature Bank had a large number of uninsured deposits, like First Republic, which gave rise to fears that clients would withdraw their money.
Source: Ministry of Finance
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