Republic First Bank has been shut down by Pennsylvania authorities, becoming the first bank in the US to fail in 2024.

In an announcement published on the morning of April 27 (Vietnam time), the US Federal Deposit Insurance Corporation (FDIC) said that this agency was designated to manage the assets and to protect depositors. The FDIC has agreed to sell Republic First Bank to Fulton Bank.

Fulton Bank will take over all of Republic First Bank's deposits and assets.

There was no loss to depositors. The bank's 32 branches in New Jersey, Pennsylvania and New York reopened as Fulton Bank branches on the evening of April 27 (Vietnam time).

Despite being a very small bank in the US with $6 billion in assets and $4 billion in deposits, the bankruptcy of Republic First Bank is a signal that the US banking system is not out of trouble yet.

Republic First Bank was spun off from First Republic Bank. In May 2003, First Republic Bank (based in San Francisco) was closed and most of its assets were sold to JPMorgan Chase.

As of the end of 2022, First Republic Bank was the 14th largest bank in the United States and had more than $220 billion in assets.

In 2023, the US recorded 5 bankruptcies in the banking sector. The largest bankruptcy was First Republic Bank (FRB).

The second largest bankruptcy was Silicon Valley Bank (SVB) in March 2023. SVB had assets of $209 billion at the end of 2022.

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Republic First Bank is the first bank in the US to fail in 2024. Photo: NYT

Also in 2023, the US recorded the bankruptcies of Silvergate Bank and Signature Bank. The last bank to fail last year in the US was Citizens Bank (Iowa), in November 2023.

First Republic Bank, now Republic First Bank, was a victim of the wave of withdrawals from small banks in the US over the past few years.

Before its collapse, First Republic Bank recorded a more than 40% drop in deposits in the first quarter of 2023. This caused FRB shares to evaporate 97% in nearly 5 months and trading was suspended.

Previously, First Republic Bank was famous in the US banking system for owning a chain of franchise banks and having a customer base that was mainly rich and powerful (reportedly including Facebook's Mark Zuckerberg). First Republic Bank had a huge source of deposits at very low costs.

Even when SVB and Signature Bank collapsed in early 2023, First Republic Bank still had no loans more than 90 days past due thanks to its very high-quality customer base.

World financial markets in an unpredictable decade

The world financial market is falling into an extremely unpredictable period with uncertain fluctuations, from high inflation on a global scale, the sharp increase in commodity and gold prices without stopping, to the phenomenon of many types of assets increasing and decreasing unexpectedly.

A huge amount of money has been pumped out by countries over the past years, since the Covid-19 pandemic, causing many types of assets including stocks, real estate, gold, cryptocurrencies... to increase sharply and potentially create a bubble that is at risk of collapsing.

If First Republic Bank went bankrupt in May 2023 due to high interest rates and a sharp decline in the US stock market, then at present Republic First Bank is also bankrupt due to high interest rates but sharp declines in real estate prices.

Republic First Bank went bankrupt after being pressured by high costs and falling profit margins, according to reports. The bank had to cut jobs and exit the home loan business.

Republic First Bank has been hit hard by rising interest rates and falling commercial real estate values. Office buildings in the United States have seen high vacancy rates in the wake of the pandemic. These factors have exposed banks to increased financial risk. Debt secured by depreciating real estate has led to a rise in bad debt.

Many local banks in the US, like Republic First Bank, are in a period of turmoil. When a bank is in trouble, depositors can rush to withdraw their money at any time.

Bad news and a wave of bank runs have put the world on the brink of a new crisis. Meanwhile, gold prices have been rising steadily recently and have reached historic highs many times thanks to money seeking shelter from the storm.

Many experts believe that the US banking sector will continue to face difficulties until the US Federal Reserve (Fed) cuts interest rates. Maintaining high interest rates will continue to cause more stress and the possibility of more bank failures cannot be ruled out.

However, the Fed is having a hard time deciding to cut interest rates because inflation remains high. Recently, many Fed officials have expressed the view of delaying the decision to cut interest rates, instead of the expected June, it may be postponed to September, or even next year.

On Kitco, expert Andrew Axelrod said that the financial crisis is just beginning. He emphasized that many banks have deep ties to the commercial real estate sector. Meanwhile, this sector is at risk of collapse due to the trend of remote work and businesses are shrinking their operations.

Axelrod predicts that economic uncertainty could push gold to $3,000 an ounce by 2024. “$3,000 an ounce is not crazy,” he said. Central banks around the world have been buying gold recently, and that trend is likely to continue.

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