Supervisory authority towards the liquidation of First Republic
The US banking regulator is about to put First Republic Bank into compulsory administrative liquidation. The American media report it. The decision emerges after the collapse on Wall Street, with the minus 43 percent recorded during the day by the title, resulting in rumors of an impending bankruptcy. Since the beginning of the year, First Republic Bank has lost 97 percent. The American authority believes that the bank’s financial conditions have deteriorated and there is no more time to find a buyer in the private sector. If the San Francisco-based bank were to go into liquidation, it would be the third US bank to collapse since March. First Republic’s deposits had lost more than $100 billion in the first quarter of the year.
According to the Wall Street Journal, the US agency in charge of guaranteeing bank deposits, the FDIC, could take control of the bank this weekend and then sell its assets to another institution. JPMorgan Chase and PNC Financial Services are among the companies affected, the company newspaper added, citing sources familiar with the matter. Shares of First Republic fell 43% on the New York Stock Exchange on Friday, hitting $3.51. after several suspensions of quotations due to excessive volatility. Founded in 1985 in San Francisco with branches located primarily in urban areas on the East Coast, with wealthy clientele, First Republic was the 14th largest bank in the country by assets at the end of 2022.
The hypothesis of a repurchase of some assets by other banks, the analysts explain, is possible without the intervention of the authorities but also encounters considerable obstacles, as most of the loans granted by Prima Repubblica are fixed-rate mortgages, which have therefore lost value with the recent increase in interest rates. The scenario of a simple takeover by another bank is, for a similar reason, unlikely. Indeed, the new owner should immediately integrate into his accounts the fact that the bank’s assets linked to fixed rates, such as mortgages or treasury bills, have lost value.
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