Components
Strike Three: First Republic Bank is Out
On May 1, 2023, First Republic Bank (FRC) failed, one week after it announced its first quarter earnings on April 24, 2023, and only a few weeks after the high-profile failures of Silicon Valley Bank and Signature Bank. During the April earnings announcement, Neal Holland, the Chief Financial Officer of FRC, revealed that the bank had suffered an outflow of over $100 billion in deposits. This resulted in its stock price plummeting, and it ultimately became the second largest bank failure in U.S. history. The critical incident (CI) concludes on May 1, 2023, where students are asked to focus on the domains of business, banking, and finance to evaluate the timing and revelations that Holland made during the earnings announcement and discuss if there was anything FRC could have done differently.
In completing this assignment, students should be able to:
1. Differentiate how First Republic Bank operated in the banking industry relative to other banks.
2. Evaluate how monetary policy is used to combat inflation and the risks rising interest rates pose to financial institutions such as First Republic Bank.
3. Analyze a company’s obligation to publicly disclose a material event.
4. Determine the major factors contributing to First Republic’s failure through a critical examination of the bank’s operations and strategic choices.