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The US government’s sell-off of failed banks set local expectations for the future

Three major US regional banks failed within six weeks requiring intervention from the Federal Deposit Insurance Corporation (FDIC). The sudden collapse of Silicon Valley Bank in mid-March Signature Bank withdrew at the same time and sent the US banking sector into turmoil.

While the federal intervention to support deposits in these two financial institutions has brought some stability as a whole, some banks continue to falter. The latest developments, San Francisco’s First Republic Bank capitulated After revealing that more than half of the bank deposits were withdrawn during the first three months of the year.

JPMorgan stepped in to buy the bank from the FDIC for $10.6 billion A loss share agreement is fought in commercial loans and residential mortgages. The deal will cost the FDIC Deposit Insurance Fund an estimated $13 billion. JP Morgan also secured $50 billion in five-year financing An undisclosed fixed price as part of the deal.

The FDIC says that the The big banks didn’t get any special benefits in their acquisitions of failed financial institutions. However, the analysts They worry that potential buyers of troubled banks will now wait for their collapse in order to get hold of sweeteners. FDIC officials counter that potential buyers risk losing out if they allow acquisition target value to deteriorate over time while they wait for FDIC custody.

“For potential acquirers, there is an incentive to wait for custody and the FDIC’s assistance,” he said. Christopher Wolff, head of North American banks at Fitch Ratings, told Reuters.