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US government sale of failed bank sets hopes for future sweetener

Three major US regional banks failed in the six weeks that required intervention from the Federal Deposit Insurance Corporation (FDIC). The Sudden Collapse of Silicon Valley Bank in Mid-March At the same time, it withdrew signatory banks and plunged the US banking sector into chaos.

Federal intervention to protect deposits at these two financial institutions has brought some overall stability, but some banks continue to struggle. First Republic Bank of San Francisco goes bankrupt After revealing that more than half of bank deposits had been withdrawn in the first three months of the year.

JP Morgan stepped in to buy bank from FDIC for $10.6 billion And we entered into loss sharing agreements on commercial and residential mortgages. The transaction will cost the FDIC Deposit Insurance Fund an estimated $13 billion. JP Morgan also raised $50 billion in five years At a non-disclosed fixed rate as part of the transaction.

The FDIC is The megabank received no special advantages in the acquisition bankrupt financial institution.However, analysts Ailing bank buyers fear they will wait for banks to go bankrupt to get the sweetener. FDIC officials counter that if they allow the value of the target to depreciate over time while they wait to become FDIC receivers, they risk becoming a buyer.

“Potential acquirers have an incentive to wait for receivership and FDIC assistance.” Christopher Wolfe, head of North American banking at Fitch Ratings, told Reuters.

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