How to shore up America’s banks after First Republic’s demise

WHENA deeplyFDICSVBSVB insolvent bank fails and its depositors are made whole somebody has to bear the losses. In the case of , the bulk of which was taken over by JPMorgan Chase on May 1st, the Federal Deposit Insurance Corporation () . It expects to lose about $13bn as a result of what is the second-biggest retail-bank failure in America’s history. Yet customers with bank balances above the notional deposit-insurance limit of $250,000 have escaped unharmed, just as they did after the failure of Silicon Valley Bank () kicked off America’s banking crisis in March.A full depositor bail-out was inevitable given that policymakers had promised, after ’s failure, that all America’s deposits were safe. But it is striking that neither their reassurances nor $93bn of unusually generous emergency loans from the Fed could keep First Republic alive. Even on charitable terms emergency loans were a more expensive source of financing than the deposits the bank had lost, while rising interest rates had reduced the value of its fixed-rate loans and bonds. Having lost $107bn or 90% of its uninsured deposits, excluding a last-minute infusion from other banks, California’s regulators reckoned it had become “structurally unprofitable”.