Uday Kotak hails JPMorgan, asks India to learn from US

While commenting on this development, Kotak highlighted the need for strong domestic financial institutions backed by reliable domestic capital. According to the banker, India must also nurture such institutions as the US has done.

“One more bank failure: First Republic Bank. JP Morgan immediately swoops it up. Highlights strong domestic US financial institutions with significant capital & capable leadership. India too must nurture strong institutions backed by reliable domestic capital,” he tweeted.

JPMorgan’s decision to acquire First Republic Bank comes after the regulators saw fewer chances of rescuing the San Francisco-based bank. Private sector efforts to yield a deal also failed, leading to the takeover by regulators. Banks were earlier reluctant to invest money to rescue the troubled regional lender in recent days, but some were said to be interested to make offers if it is auctioned.

The California Department of Financial Protection and Innovation had taken over the reins of First Republic Bank, subsequently leading to its closure as confirmed by the Federal Deposit Insurance Corporation (FDIC). 

The ailing lender was facing mounting troubles amid plummeting share values and the withdrawal of large deposits, thereby amplifying the already shaky investor confidence.

In an attempt to safeguard the interests of the depositors, the FDIC sought the assistance of JPMorgan Chase. A purchase and assumption agreement was subsequently entered into between the parties, under which JPMorgan would absorb all deposits and significantly all of the assets of First Republic Bank.

The developments have come as a big blow to First Republic Bank, which has become the third bank to fail in the United States in 2023 after Silicon Valley Bank and Signature Bank. The lenders have faced immense challenges due to a variety of factors, including deposit withdrawals, declining investor trust, and the lack of any substantial support from private-sector stakeholders.