image source, Good pictures
US regulators are racing to find a savior to buy First Republic Bank in a deal to be announced as soon as Sunday.
The Federal Deposit Insurance Corporation has reportedly asked six banks to bid for the embattled lender.
First Republic shares fell last week after it admitted withdrawing $100 million in customer deposits in March.
Around that time, its rival Silicon Valley Bank collapsed, sparking fears of a broader banking crisis.
SVB’s failure was quickly followed by the demise of another US lender, Signature Bank.
According to reports, the US financial regulator, the Federal Deposit Insurance Corporation (FDIC), had solicited bids for First Republic by the end of last week and was evaluating them over the weekend.
Investment banking firm JPMorgan Chase is believed to be one of the banks invited to bid for First Republics, according to news agency Reuters. Apparently Bank of America has also been approached.
The BBC has contacted the FDIC, JP Morgan and Bank of America for comment.
Concerns about the global banking sector grew last month after problems emerged at a Silicon Valley bank.
Central banks around the world have been raising interest rates sharply over the past year to reduce the rate of inflation.
This has affected the values of large portfolios of bonds bought by banks when rates were low, raising concerns that other institutions may face similar situations.
Meanwhile, in Europe, Swiss banking giant Credit Suisse – mired in its own problems for years – said it would need to borrow $54bn from the country’s central bank to shore up its finances.
Credit Suisse was rescued by long-time rival UBS.
Like Silicon Valley Bank, First Republic is a mid-sized US lender. In March, a group of 11 US banks offered to pay $30bn into First Republic in a bid to stabilize the business. Among them is JP Morgan.
However, investors in the bank were shocked last week when First Republic disclosed the amount that depositors took from the lender in March.
First Republic counts wealthy individuals among its customers, whose money is at risk if a buyer is not found. In the United States, the FDIC insures deposits up to $250,000.
When Silicon Valley Bank and Signature collapsed, the FDIC offered to guarantee all deposits to prevent people from trying to withdraw their money, known as a run on the bank.
If a buyer cannot be found for First Republic, the FDIC may take similar steps.
