Why the First Republic Bank failure is different

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May 2

First Republic Bank, based in San Francisco, has shut its doors. But this bank failure is different from another recent failure — the March closure of Silicon Valley Bank — in that depositors knew on the day of the announcement how they could access their funds, even if their balances were outside federal insurance limits, according to a JPMorgan Chase press release.

Here's a look at how the two bank failure announcements compare, and what you should know to protect your deposit accounts in the event of a future bank failure.

First Republic Bank and SVB: The difference

The Federal Deposit Insurance Corp. announced on Monday that First Republic Bank "was closed." However, First Republic deposit customers can access their funds. According to the FDIC press release, "All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits." In addition, customer bank balances will continue to be insured "up to applicable limits."

Federal insurance is typically limited to $250,000 in many cases. But for First Republic, "JPMorgan Chase is assuming all deposits — insured and uninsured," according to the JPMorgan Chase press release.

That's in contrast to the March 10 FDIC announcement about Silicon Valley Bank's closure. With that announcement, it wasn't immediately clear that customers with deposits above the federal limits would be able to access their money. Two days later, a joint statement issued by the FDIC, Treasury and Federal Reserve said that "depositors will have access to all of their money starting Monday, March 13."

The First Republic Bank announcement provided more immediate clarity to customers.

What to know about FDIC insurance

Federal insurance allows bank customers to be able to access their money, up to the insured amounts, in the event of a bank failure.

According to the FDIC, deposit accounts, such as checking and savings accounts, are typically insured up to $250,000 per depositor, per insured bank and per ownership category. (A "single" account is one type of ownership category, a "joint" account with more than one owner is another type of ownership category.)

Credit unions also offer federal protection through the National Credit Union Administration, also up to $250,000 per owner, per insured credit union and per ownership category.

The statement from JPMorgan Chase is notable because it allows First Republic Bank depositors to have access to their uninsured deposits, which generally means those with balances above the $250,000 FDIC limits.

How to protect your deposits

This is likely a welcome announcement for affected customers. But for anyone with a large amount of money in the bank, you will want to consider how you can protect your balance when it's above $250,000.

If you have a balance that is within federal insurance limits, you'll want to make sure your money is with a financial institution that's federally insured. This could be a large bank with several branches, a smaller regional one or even an online bank.

In addition to banks and credit unions, there are financial technology companies that offer spending and saving apps that earn interest. These companies typically partner with an FDIC-insured bank to hold customer funds. Before opening any account, check with the institution directly to see if your funds would be federally insured.

Bank failures are rare, but they can happen. In fact, there have been 564 bank failures since 2001, and three this year — though the ones that failed this year are the first since October 2020. For context, as of December 2022, there were about 4,700 FDIC-insured banks.

With the First Republic Bank failure, former customers will have an opportunity to continue a banking relationship with JPMorgan Chase. But the news of First Republic's closure is a reminder to anyone with a checking or savings account about the importance of federal insurance.

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