U.S. FDIC is probing former First Republic Bank directors and officers - spokesperson

First Republic Bank

01/11/2023 21:27

(Adds more context in paragraphs 7-10)
    By Douglas Gillison and Chris Prentice
       Nov 1 (Reuters) - The Federal Deposit Insurance
Corporation (FDIC) is investigating potential misconduct by
executives and board members of First Republic Bank, raising the
prospect of stiff penalties for the failed bank's former bosses.
    "We can confirm a D&O probe into First Republic is taking
place," a spokesperson told Reuters, referring to the bank's
directors and officers. The regulator did not provide further
details.
    The investigation, which has not previously been reported,
is the third the FDIC has opened into bank failures earlier this
year which cost the federal government's deposit insurance fund
about $32 billion.
    FDIC Chairman Martin Gruenberg said in March that the agency
was also probing possible misconduct related to the collapses of
Silicon Valley Bank (SVB) and Signature Bank New York. The FDIC
has not provided updates on these investigations. 
        The three banks, which combined held more than a half
trillion dollars in assets, failed following depositor runs.
Regulators have said they each exhibited weak risk management
and ran high levels of uninsured deposits. 
    As with SVB and Signature Bank, the FDIC is probing whether
First Republic executives and board members broke rules that
require them to act in the bank's best interests. 
    Under federal law, the FDIC can ban former directors and
officers from the industry, and impose fines for breaching their
fiduciary duty and unsafe or unsound practices that involve
dishonesty or "willful or continuing disregard" for a bank's
wellbeing. 
    Former First Republic CEO and President Michael Roffler and
former executive Chairman James Herbert could not immediately be
reached for comment. Attorneys representing the bank's
independent board members did not immediately return a request
for comment.
        Roffler told lawmakers in May that regulators never
expressed any concern about the bank's strategy, liquidity or
management and that it had been "contaminated overnight" by the
depositor panic from SVB and Signature Bank. 
    It is standard practice for the FDIC to probe bank failures
and not necessarily an indication of wrongdoing. 

 (Reporting by Douglas Gillison and Christine Prentice; editing
by Michelle Price)
 ((douglas.gillison@thomsonreuters.com; Reuters Messaging:
@douglasgillison))