First
Republic Bank (FRB) was one of the main players in the distress that passed
through the American banking sector in recent months. Wanting to nip its growth
in the bud, the Californian regulator took control of the bankrupt institution
and sold its assets to JPMorgan Chase. Almost a month later, the new owner
announced that 15% of the current workforce, or 1,000 people, would lose their
jobs as part of the restructuring. This number may increase over time.
JPMorgan Chase Lays Off
Workers from Acquired FRB
According
to Thursday’s information, JPMorgan Chase offered permanent or temporary
employment to 85% of the FRB’s current workforce. However, the rest of the
employees of the bankrupt lender, found out that there was no place for them in
the new structures being formed after the takeover, according to information
presented by Bloomberg, who cited a person familiar with the matter.
Over time,
the number of layoffs may exceed 1,000, as many employees have received only a
temporary employment offer for three, six, nine, up to twelve months.
“Since
our acquisition of First Republic on May 1, we’ve been transparent with their
employees and kept our promise to update them on their employment status within
30 days,” a spokesperson for New York-based JPMorgan commented. “We
recognize that they have been under stress and uncertainty since March and hope
that today will bring clarity and closure.”
The
bankrupt FRB had its own employment-cutting plans by 25% at the end of April.
However, these turned out to be insufficient, and a few days later, the
institution declared bankruptcy. For JPMorgan, which employs nearly 300,000
people in total, laying off a thousand does not seem to be a significant move
for such a large structure.
JPMorgan
took over $173 billion in FRB loans, $30 billion in securities, and $92 billion
in deposits. The most prominent American bank has become even larger thanks to
this takeover. As it forecasts, acquiring FRB will increase annual income by an
additional $500 million.
The Story of the First
Republic Bank Fall
First
Republic was founded in 1985 and, after the financial crisis of 2008, attracted
many high-net-worth clients. However, in March, it experienced a very dynamic
outflow of deposits, exceeding $100 million in one month after an earlier
payout of almost $200 million last year. Problems quickly began to pile up,
leading to the institution’s final downfall a few weeks later.
“The
DFPI (California Department of Financial Protection and Innovation) appointed
the Federal Deposit Insurance Corporation (FDIC) as receiver of First Republic
Bank,” a regulatory announcement stated.
The fall of
First Republic occurred two months after two large American banks, Silicon
Valley Bank and Signature Bank, came under the FDIC’s administration, and
another, Silvergate Bank, announced a voluntary liquidation.
This article was written by Damian Chmiel at www.financemagnates.com.
