© Reuters
Investing.com –The U.S. Federal Deposit Insurance Corporation is set to place First Republic under receivership imminently, Reuters reported Friday, citing an unnamed source.
First Republic Bank (NYSE:) fell 47% in after-hours trading following the news after closing down 43% in regular trading.
The need for speed to rescue First Republic comes as the U.S. banking regulator believes that it is unlikely the beleaguered regional lender will be able to pursue a rescue through the private sector, the report said, citing the source.
First Republic and FDIC representatives didn’t immediately respond to requests for comment, according to Reuters.
The midsize American had been desperately searching for a white knight to boost its finances after customers raced to pull funds following the recent turmoil in the banking sector.
Deposits slumped by 35.5% to $104.47 billion in the first three months of its fiscal year, much worse than Wall Street expectations of $136.36B.
The flight of deposits came even as major Wall Street banks pledged $30 billion in uninsured deposits to support the battered regional bank last month.
But banks were reluctant to answer the cry for help from the First Republic for a second time, leaving the struggling lender with little room to maneuver its way out of trouble with privately-sourced deal.
The report of a government rescue comes just a month after Silicon Valley Bank and Signature Bank (OTC:) collapsed, forcing the FDIC to take over lenders’ deposits.
In the weeks following the downfall of the two biggest bank failures since the Great Financial Crisis, the Federal Reserve has acknowledged some shortcomings in its oversight of banks but vowed to increase regulatory scrutiny in the financial system.
“SVB’s failure demonstrates that there are weaknesses in regulation and supervision that must be addressed,” Michael Barr, the Fed’s vice chair for supervision said in a 114-page report released on Friday.
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