NEW YORK: PNC Financial Services Group (PNC.N), JPMorgan Chase & Co and Citizens Financial Group Inc were among the banks that filed final bids for First Republic Bank on Sunday in an auction overseen by US authorities, according to the sources familiar with the case.
The Federal Deposit Insurance Corp was expected to announce an agreement on Sunday night, along with the regulator’s announcement that it had seized the bank. As the process dragged on into Sunday evening, one source familiar with the situation said regulators had returned multiple times with requests for bids to be revised and specific criteria on assets being bid to be refined. Reuters quoted sources as saying “there is a sense that a decision is coming.”
According to reports, US regulators have been seeking to clinch a sale of First Republic over the weekend, with approximately a half-dozen banks bidding in what is expected to be the third big US bank to fail in two months. Guggenheim Securities is counseling the FDIC, according to two people familiar with the situation on Saturday. The Guggenheim, the FRC, and the banks all declined to comment. A First Republic deal would come less than two months after Signature Bank and Silicon Valley Bank failed amid a deposit flight from US lenders, leading the Federal Reserve to intervene with emergency measures to stabilize markets.
While markets have since calmed, a deal for the First Republic would be closely reviewed to determine how much support the government would need to provide. Deposits up to $250,000 are officially insured by the FDIC. However, fearing further bank runs, regulators went above and beyond by insuring all deposits at both Silicon Valley Bank and Signature.
It remains to be seen if authorities at the First Republic would be required to do the same. They would require approval from the Treasury Secretary, the President, and supermajorities on the boards of the Federal Reserve and the FDIC. The FDIC is turning to some of the major lenders in the United States to find a buyer before shutting the bank. According to one source, large banks were encouraged to bid for FRC’s assets.
JPMorgan has more than 10% of all bank deposits in the United States.
As per a source who is an expert on bank failures, the 1994 law and interpretation of the document, federal law prohibits a large bank from acquiring a bank that exceeds a 10% threshold of total deposits, but that could be waived by banking regulators if the bank is buying a failed bank.
