Bidders circling in First Republic sale

US regulators were in a race last night to secure a sale of First Republic as it looked set to become the latest bank to fail amid a global crisis for the industry.

JP Morgan and PNC Financial Services Group were among those still in the running for the San Francisco-based lender, whose share price has plunged 97 percent this year.

It follows the demise of three other US companies – Silicon Valley Bank, Signature and Silvergate – as well as European giant Credit Suisse being acquired by rival UBS.

The crisis erupted in March, shaking stock markets and temporarily freezing bond investors’ willingness to lend money to banks.

Markets have calmed down since then, but all eyes will be on how they react to today’s latest collapse – and when UK markets reopen tomorrow after May’s Bank Holiday.

First Republic was already the target of a sharp sell-off in shares when the crisis began, but was given a stay of execution when Wall Street banks agreed to inject £24 billion in deposits.

But that proved to be short-lived, as first-quarter results released last week showed that – pulling out that injection – customers have withdrawn £80bn of funds over the three-month period.

Reports over the weekend suggested about half a dozen banks were bidding for First Republic.

A deal was expected to close in time to be announced by the Federal Deposit Insurance Corporation (FDIC) – an industry-funded system – before Asian markets opened.

It will be closely watched for signs of how much support the government will need.

The FDIC officially insures all deposits up to $250,000 (£199,000).

But in the case of SVB and Signature, regulators took the exceptional step of guaranteeing all deposits, fearing further damaging bank runs could otherwise occur.

First Republic marketed itself to wealthy clients with preferential rates on mortgages and loans.

It had a high level of deposits above the FDIC threshold – 68 percent.

The bank’s likely demise became apparent late last week, although the broader banking sector remained calm at the time.

Unlike SVB, First Republic does not have a UK subsidiary. However, the Bank of England would keep a close eye on the situation this weekend.

SVB’s UK arm was bought by HSBC in March for £1 in a deal brokered by the bank.

British banks are largely isolated from the crisis – they were forced by regulators to strengthen their balance sheets after the 2008 financial crisis.

But the spectacle of billions being quickly written off from bank deposits – thanks to easily accessible online accounts – has made authorities reflect on how ready they are to handle a bank run.

Officials have ordered an urgent review of the UK savings guarantee limit, which stands at £85,000.