First Republic Bank executives are under investigation by the Federal Deposit Insurance Corp. for potential misconduct, Reuters reported.
"We can confirm a [directors and officers] probe into First Republic is taking place," an FDIC spokesperson told Reuters Wednesday.
The regulator did not provide additional details and has not returned Banking Dive’s request for comment.
This marks No. 3 for investigations into the bank failures that cost the FDIC $32 billion this year, adding to a list that includes Silicon Valley Bank and Signature Bank.
Those investigations were announced in March. The FDIC did not respond to an inquiry from Banking Dive on where those investigations stand now.
First Republic’s May failure was the third domino to fall this spring, after SVB and Signature’s respective failures on March 10 and March 12.
Former CEO Michael Roffler told the House Financial Services Committee in May that contagion caused his bank to fail.
“Up until the cataclysmic events of March 10 … First Republic was in a strong financial position with strong investment grade ratings aligned with the nation’s largest banks,” Roffler said at the time.
Eleven large U.S. banks infused First Republic with $30 billion early in the banking crisis, but it was ultimately seized by the FDIC May 1 and sold to JPMorgan Chase.
The transaction was heavily criticized by Sen. Elizabeth Warren, D-MA, who questioned regulators’ decision to pick JPMorgan as First Republic’s buyer.
“The net result of these machinations is that, without a complete regulatory review, and at a cost of $13 billion to the Federal Deposit Insurance Fund, the nation’s biggest bank — already too big to fail — got a bargain deal on a failing bank that made it even bigger,” she wrote. “This is a troubling outcome, leaving me with numerous questions.”
The FDIC is now investigating if First Republic executives and board members failed to act in their bank’s best interests, Reuters reported.
Federal law allows the FDIC to ban former directors and officers from the banking industry if they are found to have made decisions with "willful or continuing disregard" for a bank’s best interests. The FDIC can also impose fines on these individuals.
Roffler and former First Republic Executive Chairman James Herbert could not be reached by Reuters for comment.
