Why First Republic failed. Are other banks to follow?
Scoop USA Newspaper|May 05, 2023
First Republic Bank has become the second large regional bank with assets over $200 billion to fail in just a few weeks
Why First Republic failed. Are other banks to follow?

Like Silicon Valley Bank, which was seized by the government on March 10, First Republic catered to a wealthy clientele, which helped it grow deposits rapidly, but may have also contributed to its undoing. The bank's business model left it susceptible to a sudden rise in interest rates.

Since the collapse of Silicon Valley Bank — and Signature Bank the same weekend — investors have wondered who's next. First Republic quickly rose to the top of that list--but investors and analysts worried about banks such as Comerica and KeyCorp, which also had large numbers of accounts with deposits above the federally-insured level of $250,000. Here are some things to know about the collapse of First Republic Bank.

WHY DID FIRST REPUBLIC FAIL?

First Republic grew rapidly through deposits from wealthy individuals and companies. It used those deposits to make large loans, including jumbo mortgages, when interest rates were at historically low levels in hopes of then convincing customers to expand into more profitable products like wealth management.

Many of the bank's accounts had deposits well north of the federally-insured $250,000. Once Silicon Valley Bank went under, clients pulled their money, fearful their deposits were in danger. First Republic said last week that depositors had withdrawn more than $100 billion, most of it during a few days in mid-March.

This story is from the May 05, 2023 edition of Scoop USA Newspaper.

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This story is from the May 05, 2023 edition of Scoop USA Newspaper.

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