US regulators have seized First Republic Bank and sold its assets to JPMorgan Chase in an effort to resolve what has been described as the largest US bank failure since the 2008 financial crisis.

The entire banking sector took a hit in March when depositors fled from smaller banks to larger incumbents following the collapse of Silicon Valley Bank and Signature Bank. The impact at First Republic was not thought to be so dramatic, but the bank last week revealed more than $100 billion in outflows in the first quarter of 2023.

In response to this news, California regulators on Monday seized the bank and put it into Federal Deposit Insurance Corp (FDIC) receivership – costing its Deposit Insurance Fund about $13 billion. It is the largest bank to fail since Washington Mutual in 2008.

The FDIC has agreed a $10.6 billion deal with JPMorgan in exchange for most of First Republic's assets along with access to the wealthy client base it attracted by providing high net-worth customers with preferential rates on mortgages and loans. (First Republic previously said its median single-family home loan borrower had access to cash of $685,000).

Furthermore, the bank's 84 offices in eight US states reopened as branches of JPMorgan Chase on Monday.

JPMorgan chairman and chief executive, who previously bought Bear Stearns in a weekend rescue in 2008, said that the bank accepted the government's offer to "step up". Dimon agreed a loss-share deal with the FDIC on the single family, residential and commercial loans it has bought and will not take on First Republic's corporate debt or preferred stock.

Reacting to the news, US president Joe Biden praised the deal for protecting depositors at the expense of shareholders who will be wiped out instead of taxpayers.

Speaking at the White House, the president called for stronger regulations on banks, and said: "These actions are going to make sure that the banking system is safe and sound. Critically, taxpayers are not the ones that are on hook."

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