Republic First seizure signals more bank failures to come, expert warns (2024)

FAQs

Republic First seizure signals more bank failures to come, expert warns? ›

"This bank failure indicates that additional failures will occur and will range between smaller community banks and larger banks," said Joseph Lynyak, a banking attorney at Dorsey & Whitney, regarding the seizure of Republic First by U.S. regulators.

The news: Last Friday, Pennsylvania financial regulators seized and shut down Philadelphia-based Republic First Bank in the first FDIC-insured bank failure of 2024.

In 2022, Republic First's financial auditor told the bank it had “material weaknesses in internal control over financial reporting,” according to a regulatory filing.

Historically, small banks are more likely to fail than large banks because they concentrate on regional lending, have fewer revenue streams to diversify risk and possess less capital to absorb losses. However, robust regulatory oversight and FDIC insurance help mitigate the risk to depositors.

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.

Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates. The majority of those banks are smaller lenders with less than $10 billion in assets.

Here's what typically happens. The FDIC announces that the bank is closed, and the FDIC is appointed as its receiver so it can help use the bank's assets to pay depositors and creditors. In most cases, the FDIC will try to find another banking institution to acquire the failed bank.

Is My Money Safe at First Republic Bank? According to the FDIC, all 84 branches of First Republic Bank now operate under the JPMorgan brand. All deposits were transferred to JPMorgan, and no depositors lost any money as a result of the closure.

JPMorgan Chase & Co

First Republic Bank / Parent organization

First Republic is now part of JPMorgan Chase.

Visit chase.com/branch to view branch locations near you.

Which 4 banks are in trouble? ›

Companies Considered Too Big to Fail

The Bank of New York Mellon Corp. Citigroup Inc. The Goldman Sachs Group Inc. JPMorgan Chase & Co.

Earlier last year Silicon Valley Bank failed March 10, 2023, and then Signature Bank failed two days later, ending the unusual streak of more than 800 days without a bank failure. Before Citizens Bank failed in November 2023, Heartland Tri-State Bank failed July 28, 2023 and First Republic Bank failed May 1, 2023.

The short answer is no, not directly. A bank can only directly access funds from an account you hold at a different financial institution to settle debts if they follow the legal process of obtaining a judgment and garnishment order.

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).

The Federal Reserve Board on Wednesday announced that the Bank Term Funding Program (BTFP) will cease making new loans as scheduled on March 11.

"There's a much more dramatic drop in values than what the market estimated in 2023." Analysts, however, do not expect turmoil from the banking sector's exposure to commercial real estate. "This is a slow wreck, not a high-speed crash," said Biggar of Argus Research.

On March 10, 2023, Silicon Valley Bank (SVB) failed after a bank run, marking the third-largest bank failure in United States history and the largest since the 2007–2008 financial crisis. It was one of three bank failures, along with Silvergate Bank and Signature Bank, in March 2023 in the United States.