First Republic Bank has finally announced that it will sell the remainder of its assets to JP Morgan to the tune of $10.6bn. The collapse of the regional lender has made it the second largest banking failure in US history, and its downfall has somewhat renewed concerns for the banking sector. JP Morgan executives said that the takeover was carried out in order to help alleviate these concerns.

First Republic’s collapse is now the third major banking failure in the US to have taken place over the last two months, amongst the likes of Silicon Valley Bank – which was acquired by First Citizens. It was enough to prompt Biden to state that stronger regulation for banks is required to prevent further failures. Some have pointed out that the failure of mid-tier banks like First Republic further consolidates the dominance of major banks – sometimes described as “too big to fail”.

Concerns linger

Major banks have also been taking efforts to reduce their costs in order to safeguard their stability while concerns for the banking sector linger. Morgan Stanley announced plans yesterday to layoff some 3,000 employees (or 5% of their workforce) in efforts to cut costs. The Fed is also set to make an announcement today. Experts are predicting that another 0.25 bps rate hike is to be expected, however a pause on future hikes is also fairly likely.

Whether this takeover will help alleviate concerns for the sector remains to be seen, but at the very least – it has drawn a line under the First Republic saga of the past few months.

(About First Republic)

First Republic Bank was a US-based financial institution that provided private banking, private business banking, wealth management, trust services, and real estate lending services. The bank was founded in 1985 and is headquartered in San Francisco, California. It operated through a network of more than 80 offices in major cities across the United States. First Republic Bank was one of the first to look shaky when concerns for the banking sector began to surface this year – with its share price having fallen by 97% since the beginning of 2023. It has since been acquired by investment banking firm JP Morgan.