“Why Did First Republic Bank Go Bankrupt? – Analysis and Insights”

Jakarta –

The banking crisis in the United States (US) continues. After Silicon Valley Bank, now is the turn First Republic Bank who went bankrupt because their savings in the bank plummeted.

Quoting CNN, Tuesday (2/5/2023) First Republic Bank was confiscated by the Federal Deposit Insurance Corporation and immediately taken over by JPMorgan Chase. First Republic became the third US lender to default and go bankrupt in the past two months.

So why did the First Republic go bankrupt?

According to observers, First Republic and SVB are banks of the same type, they rely on wealthy customers who have large cash balances, both individuals and businesses. But that’s what becomes disastrous when the market fluctuates.

“These depositors are very vulnerable to triggers. They are sophisticated, they know they have other options, and they have mechanisms to move money quickly,” Patricia McCoy, a law professor at Boston College, told CNN last month.

First Republic’s bankruptcy was proven when the bank was in the midst of reporting its financial performance in the first quarter of 2023. They revealed that the bank had lost 40% of its deposits or around US$ 100 billion.

What’s more, about two-thirds of savings in the First Republic are uninsured. Even though the portion is smaller than the uninsured SVB savings of 94%.

(there/das)