US Treasury encouraged by First Republic resolution, says banking system remains sound

The U.S. Treasury Department is encouraged that First Republic Bank FRC.N was resolved with the least cost to the Deposit Insurance Fund, and believes the U.S. banking system remains sound and resilient, a Treasury spokesperson said early Monday.

U.S. regulators on Monday seized First Republic, the third major U.S. institution to fail in two months, with JPMorgan Chase & Co JPM.N agreeing to take $173 billion of the bank’s loans, $30 billion of securities and $92 billion of deposits.

“Treasury is encouraged that this institution was resolved with the least cost to the Deposit Insurance Fund, and in a manner that protected all depositors,” the spokesperson said.

“The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families.”

San Francisco-based First Republic came under intense pressure after disclosing last week that it had suffered more than $100 billion in outflows in the first quarter and was exploring options.

Treasury had no immediate comment why regulators accepted the offer from the banking giant JPMorgan, and not those of PNC Financial Services Group PNC.N, and Citizens Financial Group Inc CFG.N, which also submitted final bids on Sunday, according to sources familiar with the matter.

The California Department of Financial Protection and Innovation said it had taken possession of First Republic and the Federal Deposit Insurance Corporation (FDIC) would act as its receiver. The FDIC estimated in a statement that the cost to the Deposit Insurance Fund would be about $13 billion.

In recent years, U.S. regulators have been slow to approve large bank deals. The Biden administration has also cracked down on anti-competitive practices.