The failure of the First Republic Bank is unique for several reasons

 

A pedestrian walks past a First Republic Bank in San Francisco. 

(Jeff Chiu / Associated Press)

San Francisco-based First Republic Bank has ceased operations, but unlike the recent failure of Silicon Valley Bank, depositors were informed on the day of the announcement about accessing their funds, regardless of whether their balances exceeded federal insurance limits. This information comes from a press release by JPMorgan Chase. To protect your deposit accounts in case of a future bank failure, it's important to compare the announcements of these two failures and learn more.

First Republic Bank and SVB: What Sets Them Apart 

On Monday, the Federal Deposit Insurance Corp. declared that First Republic Bank had officially closed. Despite this, deposit customers of First Republic Bank can still retrieve their funds. The FDIC press release states that "all depositors of First Republic Bank" will now be considered depositors of JPMorgan Chase Bank, National Association, and will retain full access to all their deposited funds. Furthermore, the balances of customer accounts will remain insured "up to applicable limits."

In many cases, federal insurance is restricted to $250,000. However, in the case of First Republic Bank, JPMorgan Chase will be taking on all deposits, whether insured or not, as mentioned in the JPMorgan Chase press release. 

This is in contrast to the announcement of Silicon Valley Bank's closure on March 10, where it was not immediately apparent whether customers with deposits exceeding federal limits could access their funds. Two days later, a joint statement by the FDIC, Treasury, and Federal Reserve declared that "depositors will have access to all their money starting Monday, March 13." 

The announcement of First Republic Bank provided greater clarity to customers right away.

Tips for Protecting Your Deposits 

This announcement will likely be a relief for those affected by the First Republic Bank failure. However, if you have a substantial balance in the bank, you should consider how to safeguard your funds when they exceed $250,000. 

If your balance is within federal insurance limits, it's essential to ensure that your money is with a financial institution that is federally insured. This could be a large bank with multiple branches, a smaller regional bank, or even an online bank. 

Aside from banks and credit unions, financial technology companies offer spending and saving apps that accrue interest. These companies usually collaborate with an FDIC-insured bank to hold customer funds. Before opening any account, contact the institution directly to determine whether your funds would be federally insured. 

Although bank failures are uncommon, they can happen. There have been 564 bank failures since 2001, with three occurring this year, the first since October 2020. As of December 2022, there were around 4,700 FDIC-insured banks. 

With the closure of First Republic Bank, former customers will have the chance to maintain a banking relationship with JPMorgan Chase. However, news of First Republic's closure emphasizes the significance of federal insurance for anyone with a checking or savings account.