Failed Bank CEO Recalls What Happened 'Overnight' Before Collapse

There’s nothing quite like a Monday morning quarterback, especially when the quarterback is the same individual who’s blaming external forces for a 40-point loss.

So it goes for former First Republic chief executive officer Michael Roffler who testified in front of the U.S. House Financial Services Committee on May 17.

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The testimony was part finger-pointing and part recrimination after one of the biggest U.S. banking collapses of the past decade over a 50-day period from March to May in 2023.

“Before March 10, First Republic was conducting business as usual,” Roffler told committee members, in reference to the Silicon Valley Bank collapse on the same day. In fact, First Republic “experienced a significant inflow of deposits” on March 9 “from clients who had withdrawn their money from Silicon Valley Bank.”

“Everything changed overnight,” he noted.

Roffler had begun his testimony with a nod to First Republic staffers who struggled to deal with the burgeoning deposit withdrawal tsunami.

“Despite herculean efforts by my incredible colleagues at First Republic…investor and depositor confidence never recovered,” Michael Roffler said at the start of the hearing.

As CEO, Roffler presided over First Republic’s unraveling as the second-largest U.S. bank to fail in the nation’s history. 

In the aftermath of the Silicon Valley Bank collapse in the second week of March, First Republic saw $100 billion in deposits disappear. The bank was running on fumes until a consortium of U.S. banks, including Bank of America, JP Morgan Chase, and Citigroup, poured $30 billion in deposits into the troubled bank in an attempt at a private sector rescue, orchestrated with regulators.

However, it didn't prove to be enough and the U.S. Federal Deposit Insurance Corp. (FDIC) took over the bank on April 28. Three days later, JP Morgan Chase won a buyout auction with a $10.6 billion bid to take over the failed bank’s assets.

Roffler described the weeks between the SVB bank failure and First Republic’s asset sale to JP Morgan Chase as a whirlwind.

“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,” he testified. “No one at First Republic could have predicted the collapse of Silicon Valley Bank and Signature Bank, the speed at which it happened, or the catastrophic effects these events had on the banking industry and consumer confidence.”