Why did First Republic Bank fail?
First Republic's undoing was triggered by the Federal Reserve's rapid series of interest-rate increases, which led depositors to seek better returns elsewhere. That meant it had to pay more to keep them, just when rising rates were battering the value of its mortgage portfolio.
Like many other banks, First Republic had tied up its reserves in long-term assets when interest rates were low. That meant trouble in 2023, when the Fed funds rate shot up 5% to quell inflationary pressures because the value of these long-term securities decreased significantly.
A run on deposits (leaving the bank without the cash to pay customer withdrawals). Too many bad loans/assets that fall sharply in value (eroding the bank's capital reserves). A mismatch between what the bank can earn on its assets (primarily loans) and what it has to pay on its liabilities (primarily deposits).
Foreign ownership, constitutional questions (the Supreme Court had yet to address the issue), and a general suspicion of banking led the failure of the Bank's charter to be renewed by Congress. The Bank, along with its charter, died in 1811.
However, an April 24, 2023 earnings call, which disclosed that First Republic lost over $100 billion in deposits during the first quarter of 2023, prompted a negative market response, a significant decline in the bank's stock price, and a resumption of significant deposit outflows.
Like the other two failed banks — Silicon Valley Bank and Signature — First Republic collapsed under the weight of loans and investments that lost billions of dollars in value as the Federal Reserve rapidly raised interest rates to fight inflation.
The move was seen as critical to stabilizing the bank's deposit base – but also a critical signal to financial markets about both the bank and the US financial system. The Federal Reserve created a loan system designed to prevent regional banks from failing after SVB collapsed.
The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank. If the bank fails, you will return your money to the insured limit.
The Federal Deposit Insurance Corp. (FDIC) insures bank accounts up to $250,000 per depositor, per account category. 1 So, unless your bank is not insured by the FDIC or you have deposited more than the FDIC limit, your money is safe if your bank fails.
If your bank closes, the FDIC will either try to move your money to another bank in good standing or mail you a check for up to the insured amount. If your money isn't moved, the bank should mail you a check within two business days of the bank closing.
What bank was the largest failure in US history?
That includes Washington Mutual (WaMu), still the largest bank failure in U.S. history. WaMu had some $307 billion in assets when it collapsed, equivalent to more than $424 billion in today's dollars.
There were 566 bank failures from 2001 through 2024. See Summary by Year below.
The largest bank failure ever occurred when Washington Mutual Bank went under in 2008. At the time, it had about $307 billion in assets. During the uncertainty of the banking crisis, however, Washington Mutual experienced a bank run where customers withdrew almost $17 billion in assets in less than 10 days.
Is my money safe? Yes. Now that First Republic is part of JPMorgan Chase, clients benefit from JPMorgan Chase's fortress balance sheet. Learn more about JPMorgan Chase & Co.
Regulators assumed control of First Republic one week after the bank's executives revealed that customers had withdrawn more than $100 billion during a panic last month.
JPMorgan has acquired First Republic for over $10bn as the latter bank became the latest casualty in the wave of US banking instability. The acquisition is one of the rare times JPMorgan is able to grow domestically, and includes the added attraction of First Republic's HNW client relationships.
The federal government seized First Republic Bank and sold it to JPMorgan Chase on Monday, ending the lender's six-week-long free fall and reassuring depositors that their money is safe.
First Republic accounts will transfer to JPMorgan Chase in phases over time. We'll always notify you in advance of any account transfers.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” they said in a statement. Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are each depositing $5 billion, the banks announced in a statement.
Is PNC bank too big to fail?
PNC is the sixth largest bank in the country with over $500 billion in assets. That makes it dramatically smaller than the Big Four banks that are informally labeled “too big to fail” and formally classified as Global Systemically Important Banks (GSIBs).
Most banks in the US are insured by the FDIC, which provides coverage up to $250,000 per depositor, per FDIC bank, per ownership category. In the event of a bank failure, insured deposits are guaranteed to be returned within two business days by the FDIC.
By law, after insured depositors are paid, uninsured depositors are paid next, followed by general creditors and then stockholders. In most cases, general creditors and stockholders realize little or no recovery.
Still, the FDIC itself doesn't have unlimited money. If enough banks flounder at once, it could deplete the fund that backstops deposits. However, experts say even in that event, bank patrons shouldn't worry about losing their FDIC-insured money.
Bank of America is just one place below JPMorgan Chase on both the 2023 G-SIBs list and the Federal Reserve's list of the largest U.S. banks, which is why it was chosen in our research as one of the safest banks.
