JPMorgan Chase will acquire most of First Republic, the embattled California lender that US government officials had been racing to save for much of the past week.
The Federal Deposit Insurance Corporation and California regulators, which announced the deal early on Monday morning, said they were simultaneously closing the bank and selling off all $93.5bn of its deposits and most of the assets to JPMorgan.
Briefly taking over the bank allowed the FDIC to enter into a loss-sharing arrangement with JPMorgan on the unrealised losses in its loan portfolio that stemmed from the recent rise in interest rates.
The bank’s jumbo mortgage loans, made at relatively low interest rates to attract and keep rich customers, had dropped significantly in value.
The deal means that all depositors, including those above the $250,000 insurance limit, will retain access to their money when the bank opens this morning.
The FDIC estimated that the losses to its insurance fund will be about $13bn.
