US bank First Republic’s assets will be taken over by JP Morgan after it became the third American lender to fail in two months.
JP Morgan has agreed a deal with regulators to acquire the “substantial majority” of First Republic’s assets, including $173 billion (£138bn) of loans.
The California Department of Financial Protection and Innovation announced early on Monday it had taken possession of First Republic and the Federal Deposit Insurance Corporation (FDIC) would act as its receiver.
The collapse follows the failures of US lenders Silicon Valley Bank and Signature Bank after investors withdrew funds.
The US central bank, the Federal Reserve, was forced to step in with emergency measures to stabilise the markets to prevent more funds being withdrawn amid growing fears of a new wider banking crisis.
The turmoil that ensued also brought down Swiss giant Credit Suisse and severely rattled investors, resulting in an uneasy time for share indexes for several weeks.
May Day holidays in many countries on Monday limited initial global market reactions to the latest collapse, with Tokyo’s Nikkei 225 index adding 0.9% and the S&P/ASX 200 in Sydney advancing 0.5%.
UK, European and many other markets were closed.
Futures for the S&P 500 and the Dow industrials edged less than 0.1% higher.
US regulators said in a statement JP Morgan will take most of First Republic’s assets and all the deposits, including uninsured ones.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman and CEO of JPMorgan Chase.
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“Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimise costs to the Deposit Insurance Fund.”
First Republic, which was founded in 1985, had total assets of $229.1bn (£182.8bn) as of 13 April and $103.9bn (£82.9bn) worth of deposits, the FDIC statement said.
The failed bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday, according to the statement.
Shares in First Republic fell to record lows after the San Francisco-based lender said last month’s banking crisis had prompted customers to withdraw more than $100bn (£79.8bn) in deposits.