The Federal Deposit Insurance Corporation (FDIC), a principal federal regulator of US banks, has set a deadline of Sunday for bids to buy struggling First Republic Bank, several media outlets reported on Saturday, citing sources.
Earlier this week, the FDIC asked a number of institutions, including the country’s largest bank JPMorgan Chase, to submit bids for the failing bank in an effort to secure a buyer before it enters receivership. As receiver, the FDIC would temporarily manage the bank’s affairs until its assets are sold.
According to Reuters, receivership is imminent, given the 75% drop in its share price last week following grim first-quarter earnings and heavy outflows of deposits. Shares touched a record low of $2.99 on Friday, with the bank’s stock down nearly 98% year-on-year.
A seizure by FDIC would make First Republic Bank the third US lender to fail after the collapses of Silicon Valley Bank and Signature Bank in March. Both were shut down by regulators following massive bank runs.
Analysts say, however, that choosing a buyer before announcing a government takeover would allay fears of further contagion in the US banking sector, and ease the stress on the FDIC’s deposit insurance fund.