First Republic, a struggling American bank, will be acquired by JP Morgan, a significant financial organisation globally, as part of a deal mediated by authorities.
First Republic’s demise on Monday was verified by the Federal Deposit Insurance Corporation (FDIC) in a statement.
According to the BBC, the world’s largest investment bank, JP Morgan, would now assume “all of the deposits and virtually all of the assets of First Republic Bank.”
Third significant US bank to fail in recent months is First Republic.
The San Francisco-based lender’s shares fell by more than 75% last week after it admitted that customers had withdrawn $100 billion (£79.6 billion) of deposits in March.
It follows the collapse of Silicon Valley Bank (SVB) in March, which prompted fears of a wider banking crisis.
That was swiftly followed by the demise of another US lender, Signature Bank.
A deposit flight from lenders has forced the Federal Reserve, the US central bank, to step in with emergency measures to stabilise financial markets.
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In March, a group of America’s biggest banks stepped forward to pump $30bn into the First Republic in a bid to stabilise the business, but the efforts proved futile.
Founded in 1985, First Republic is a mid-sized US lender, similar to SVB.
For years, it has catered to wealthy clients – whose money was at risk before the takeover was announced after a weekend of negotiations.
In the US, FDIC insures customer deposits up to $250,000.
When Silicon Valley Bank and Signature collapsed, the FDIC said it would guarantee all deposits to prevent a rush of people trying to get their money out, which is known as a run on a bank.
As part of the First Republic agreement, it will share losses on loans with JP Morgan. The FDIC has estimated that its insurance fund would take a hit of about $13bn in the deal.
First Republic’s 84 offices across eight states will also reopen as branches of JPMorgan Chase.
In Europe, banking giant Credit Suisse was bought by rival UBS in March, in a deal orchestrated by Swiss authorities.
As central banks around the world raised interest rates aggressively to dampen the rate of price rises, otherwise known as inflation, some lenders have come under pressure.
Increased interest rates have hurt the values of the large portfolios of bonds bought by banks when rates were lower.
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