The US government has reached out to JPMorgan, PNC, and several other financial institutions, including investment firms outside of the banking industry, to participate in a bidding process for all or part of First Republic. The move is an attempt by US regulators to determine the cost of taking over the struggling California lender. Over the weekend, it became apparent to both First Republic and the government that stabilization of the bank would require the Federal Deposit Insurance Corporation (FDIC) to take it over. First Republic shares have experienced losses of over 97% this year, following concerns about paper losses on its mortgage book, assets, and massive deposit outflows after Silicon Valley Bank’s collapse. The FDIC has asked around a dozen banks to provide details of their willingness to pay for First Republic’s deposits and assets and the level of losses the FDIC will have to assume to close a deal. JPMorgan and PNC are preparing bids for a post-resolution deal. The FDIC wants bidders to include receivership of First Republic, and the winning bid is likely to include assistance from the FDIC’s insurance fund. Guggenheim is the FDIC’s advisor for the process, with the number of bids and whether the FDIC considers them acceptable unknown. Taking over First Republic by the FDIC would rank among the most significant banking failures in US history. When a US bank fails, the FDIC seeks bids from other lenders for its deposits and assets to find the best way to protect customers and minimize the cost to the government’s deposit insurance fund. The FDIC’s goal is to find a buyer before it takes over, although that does not always happen.
