The First Republic banking crisis of 2023 sent shockwaves through the financial landscape of the United States, revealing vulnerabilities in the banking sector. At the center of this crisis was First Republic Bank (FRB), a prominent institution based in San Francisco catering to high-net-worth clients. On May 1, 2023, FRB made history as the second-largest bank failure in U.S. history, following a tumultuous series of events that unfolded rapidly.
The troubles began with a run on deposits, a phenomenon that had already plagued two other major regional banks, Silicon Valley Bank and Signature Bank, in the preceding weeks. FRB found itself in a precarious position, with nearly two-thirds of its deposits uninsured, surpassing the $250,000 Federal Deposit Insurance Corp. (FDIC) limit. Despite a $30 billion capital infusion from a consortium of major banks in March, FRB’s condition continued to deteriorate, sending its stock price into a downward spiral.
In a bid to stabilize the situation, the FDIC took decisive action, preparing to place FRB into receivership and seek a buyer. On April 29, 2023, the FDIC announced its plan to close FRB, marking a somber milestone in U.S. banking history. The following day, on May 1, the final blow fell as the FDIC confirmed that First Republic had been acquired by JPMorgan Chase. This turn of events not only had immediate repercussions for FRB’s stakeholders but also reverberated across the broader financial industry, prompting increased scrutiny and regulatory changes for banks with substantial uninsured deposits.
(Response: The First Republic banking crisis of 2023 was a pivotal moment in U.S. financial history, culminating in the second-largest bank failure in the nation’s annals. The events surrounding FRB’s collapse underscored the risks inherent in banking, particularly concerning uninsured deposits. This crisis prompted a reevaluation of regulatory frameworks and a heightened focus on the stability of financial institutions.)