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The collapse of US First Republic Bank

Journalist: Brandon Russell

ended 05. May 2023

The collapse of US First Republic Bank over the weekend, and its subsequent purchase by JPMorgan Chase from the US Government, have led to fears that the banking crisis is far from over with shares in other US banks dropping sharply in response.

How worried are you that this latest turmoil poses new risks to the mortgage, property and investment markets here in the UK?

5 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
The collapse of First Republic is unlikely to be an isolated incident in the banking sector, as evidenced by the recent difficulties faced by PacWest. For now, it appears that the contagion will primarily affect regional banks that have been slow to adapt to the changing market or left themselves exposed. As a result, larger banks may stand to gain by acquiring these struggling institutions for pennies on the dollar. However, as demonstrated by the 2008 financial crisis, regulators often consider major banks "too big to fail." The UK market is not immune to these dynamics, and a number of acquisitions can be expected as long as volatility persists and travels across the Atlantic.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Despite the shockwave this, and SVB, sent through financial markets, the speed at which other larger banks stepped in to purchase assets was reassuring. Markets are generally settled, but saw some volatility return this week. Whether that was down to confidence in the banking system is uncertain, but the fears over a shaky economy in the UK and across the pond are more likely to be the cause.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
The recent collapse of First Republic Bank in the US has once again reminded us of the fragility of the global banking system. The fallout from this latest collapse has raised concerns about the potential risks to the mortgage, property, and investment markets here in the UK.

While it is true that any disruption to the global financial system could have a knock-on effect on the UK, it is important to remember that the UK banking sector is in a much stronger position than it was during the 2008 financial crisis. Banks are now subjected to rigorous stress testing and are better equipped to deal with potential risks.

Risks associated with mortgages, property, and investment markets are not new and regulators are always vigilant about these potential risks. The collapse of First Republic is a sobering reminder though, of the need for continued vigilance and regulatory oversight of the banking sector. We must continue to hold banks accountable and regulators must ensure transparency.
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Jamie Lennox
Director at Dimora Mortgages
Concerns in the US naturally spill over into the UK and other markets around the world. The regulator has tried to step in early this time to avoid a further banking run but naturally created a lack of trust in the banking sector which will spill out over here. This may impact the FED's decision on if they hike rates further or not and could lead to further influence on the what Bank of England may do at their next meeting.
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Bradley Lay
Founder at Peak Capital Group
Another week, another US Bank Collapse. This time US First Republic Bank.
This recent news has sparked concerns about the stability of the global banking sector in general. With shares in other US banks also dropping, the question arises, are UK banks next?
The UK is still a major global financial center, and is vulnerable to any instability in the banking industry. One potential problem is a freeze in lending as banks become more risk-averse, leading to a slowdown in the property market and a decrease in property prices. In addition, a decline in the value of investments and pensions could harm UK savers and retirees.
The UK government may also face challenges in managing any fallout from the crisis, such as a rise in unemployment or a drop in tax revenues on an already strained budget.