First Republic Bank ($FRC), ailing from significant deposit losses and a drop in share prices, is expected to be seized by the US government, according to a report by Fox Business Network.
The report quotes bankers working with First Republic who say that they anticipate government receivership for the bank, once private sector solutions such as asset sales and finding a buyer are exhausted, as both options appear difficult.
The bank’s shares fell by about 50 percent on Tuesday, a day after it said customers had pulled $100 billion in deposits in the first quarter.
The drop in deposits has led to a record drop in the bank’s shares, which sank nearly 50% as of the end of Tuesday. The bank’s woes have been exacerbated by the recent closure of the Silicon Valley Bank in March, which has hit multiple big banks.
While the seizure is not yet final, Fox Business’ Charles Gasparino believes it is very likely to happen.
Gasparino also revealed that officials at big banks believed the Federal Reserve was poised to take over First Republic just before its earnings announcement, which led to the sharp drop in shares.
Furthermore, shareholders are now suing First Republic, accusing the bank of concealing how rising interest rates impact its business model and prompting an exodus of deposits. The bank’s troubles have been building up for some time, and this latest development highlights the severity of the situation.
The bank’s difficulties have worsened over the past month and a half, particularly since the closure of Silicon Valley Bank in March.
The situation at First Republic is a concerning development in the financial sector, and it underscores the challenges that banks are facing in the current economic climate. As with any troubled financial institution, there are likely to be ripple effects that could impact the broader economy, and it remains to be seen how regulators will respond to the situation.
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