'India too must...': Uday Kotak hails US' financial institutions after JPMorgan acquires First Republic

Hours after another bank collapsed in the US and was taken over by the country's largest lender JPMorgan, Kotak Bank CEO Uday Kotak on Monday hailed America's 'strong' financial institutions and said India too needs strong institutions backed by reliable domestic capital. The banker said JPMorgan taking over First Republic, the third bank to collapse in two months, highlights strong domestic US financial institutions with significant capital.

Also read: 'First Republic is bigger than HDFC Bank': Capitalmind's Deepak Shenoy weighs on latest US bank failure

   
"One more bank failure: First Republic Bank. JPMorgan 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 wrote on Twitter.

Earlier in the day, the Federal Deposit Insurance Corporation (FDIC) informed that First Republic Bank was closed by the California Department of Financial Protection and Innovation. First Republic Bank's shares plunged nearly 80 per cent after it recently reported massive deposit withdrawals, shaking the confidence of investors further.  

Also read: JPMorgan to acquire First Republic’s assets as US regulators intervene

To protect the depositors, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank and National Association to assume all of the deposits and substantially all of the assets of First Republic Bank. First Republic is the third bank to collapse in America after Silicon Valley and Signature Bank.

Silicon Valley collapsed on March 10, and just days later Signature Bank too went bankrupt. The sudden meltdown of two banks triggered a panic that some more banks may also fall as the sentiments of investors had turned negative and the shares of banks had begun to plunge.

However, Reserve Bank Governor Shaktikanta Das said the Indian banking system was resilient and was not adversely impacted by the events in the US. "The Indian banking system has remained resilient and has not been affected adversely by the recent sparks of financial instability seen in some advanced economies," he said while speaking at a global conference on financial resilience organised by RBI-promoted College of Supervisors

In the case of First Republic, JPMorgan and the National Association submitted a bid for all of the collapsed lender's deposits. As part of the transaction, First Republic's 84 offices in eight states will now reopen as branches of JPMorgan and the National Association. All depositors of First Republic have now become depositors of JPMorgan and National Association, and will have full access to all of their deposits, the FDIC said.

Deposits will continue to be insured by the FDIC, and customers won't have to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. The federal agency said that customers of First Republic should continue to use their existing branch until they receive notice from JPMorgan that it has completed systems changes to allow other JPMorgan Chase Bank and National Association branches to process their accounts as well.

As of April 13, First Republic had approximately $229.1 billion in total assets and $103.9 billion in total deposits.