Former First Republic Bank Chief Executive Officer Michael Roffler said his bank’s collapse was due to the contagion from other regional bank failures that triggered deposit outflows.
(Bloomberg) — Former First Republic Bank Chief Executive Officer Michael Roffler said his bank’s collapse was due to the contagion from other regional bank failures that triggered deposit outflows.
“To be clear, no one at First Republic could have predicted the collapse of Silicon Valley Bank and Signature Bank, the speed at which it happened, or the catastrophic effects these events had on the banking industry and consumer confidence,” Roffler said in prepared testimony ahead of his appearance Wednesday before a House of Representatives committee on financial services.
JPMorgan Chase & Co. agreed to buy First Republic earlier this month after it became the second-largest bank failure in US history and marked the fourth regional bank to collapse this year. Like many regional lenders, First Republic was squeezed by higher interest rates that hurt the value of its bond holdings purchased during the era of ultra-low borrowing costs.
Read More: JPMorgan Ends First Republic’s Turmoil After FDIC Seizure (3)
While First Republic understood and disclosed the earnings risks it was facing in 2023, it couldn’t have anticipated the bank failures that triggered substantial deposit outflows, Roffler said.
“Instead of dealing with temporary decreased earnings due to interest rate pressures, First Republic was contaminated overnight by the contagion that spread from the unprecedented failures of two regional banks,” he said.
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