First Republic’s white-glove service had no answer for an uninsured balance
First Republic’s clients were loyal until the question became whether money above the insurance limit was safe. In a confidence crisis, client experience means three capabilities most banks lacked: seeing each client’s insured position, changing it fast, and saying something specific.
Looking Back revisits one week at a time, from January 2020 to today, and asks what it meant for the banks, health systems and public agencies we serve. The series was written in 2026, with the benefit of hindsight, and each article says which week it looks back on.
The week
On May 1, 2023, the California regulator closed First Republic Bank and appointed the FDIC as receiver. The FDIC sold substantially all of its deposits and most of its assets to JPMorgan Chase. By assets it was the second-largest US bank failure, after Washington Mutual in 2008. First Republic had been under pressure since Silicon Valley Bank failed in March. On March 16 eleven large banks placed $30 billion of deposits with it to restore confidence. When it reported first-quarter results on April 24, it disclosed that deposits excluding those placed by the large banks had fallen by more than $100 billion during the quarter, and its shares fell sharply. On the day of the sale, the FDIC published a report setting out options for reforming deposit insurance.
First Republic built its franchise on service. Affluent households and businesses got personal bankers, quick decisions and attractive mortgage terms that won the wider relationship. That model produced loyal clients and years of growth. It also produced a deposit base with a large share above the insurance limit. When clients asked whether that money was safe, a banker’s call could not answer the question. The experience that mattered in March and April 2023 was not attentiveness. It came down to three capabilities that sit in data, products and preparation: seeing each client’s insured position, changing it quickly, and telling clients something specific. Few banks or credit unions had all three.
Seeing each client’s insured position
Deposit insurance covers each depositor, at each insured bank, in each ownership category. A single household may hold individual, joint, retirement, trust and business accounts, each insured under different rules. Core banking systems hold accounts. Most do not calculate coverage by owner and category. The largest banks, those with two million or more deposit accounts, must keep records that let the FDIC calculate coverage quickly under its Part 370 rule. Smaller institutions generally have no such requirement and no such view.
The result in 2023 was that relationship managers often could not tell a worried client, with confidence, how much of the relationship was insured. Building that view is a data project. It needs reliable owner and joint-owner records, beneficiary data for trust accounts, and entity hierarchies for business clients. The output is an estimated insured and uninsured amount per relationship, with a clear statement that the FDIC makes the final determination.
Accuracy matters as much as availability. A banker who overstates a client’s coverage creates a misrepresentation risk under FDIC rules on how deposit insurance may be described. The coverage view should show its assumptions, such as which trust beneficiaries were counted, and route complex trust and business structures to a trained specialist rather than leaving the answer to whoever picks up the phone.
The same data serves treasury. Uninsured balances held by the largest relationships are the deposits most likely to move together. A bank that can rank them can tell its asset-liability committee where outflow risk sits and which clients to call first.
Changing it quickly
Once a client knows the position, the next question is what can be done today. Several legitimate tools extend coverage. Accounts can be restructured across ownership categories. Reciprocal deposit networks place portions of a large balance at other banks, so each portion is insured, while the originating bank keeps an equivalent amount of funding. Insured cash sweeps do something similar for operating accounts. Sweeps into money market funds or Treasury bills move cash out of deposits altogether. Credit unions have analogous options under NCUA share insurance.
Speed was the constraint. In spring 2023 clients wanted changes within hours. Institutions that required paper forms, wet signatures or a banker appointment to enroll in a reciprocal program created queues, and queues during a run look like the bank stalling. Institutions with network agreements already signed, electronic enrollment and pre-approved documentation could move a large balance into coverage on the same day.
These tools carry costs. Network fees and lower margins reduce the value of the deposit. Reciprocal funding above a statutory cap counts as brokered, which matters for weaker banks. Some clients will take the cash out anyway. The comparison that matters is with losing the deposit entirely. A balance kept in a reciprocal arrangement is still a relationship. A balance wired elsewhere on a Friday afternoon is not.
Telling clients something specific
Most banks communicated in March and April. The difference was specificity. Clients asked about deposit concentration, unrealized losses on securities, available borrowing capacity and coverage. First Republic itself announced on March 12 that it had more than $70 billion of unused liquidity, and outflows continued. A liquidity figure answers a question about the bank. It does not answer a depositor’s question about their own money. Communication worked best when it came with an action the client could take on the spot, such as enrolling a balance in coverage.
Speed requires preparation, because the first days of a confidence shock are the wrong time to draft. Useful preparation includes message sets for each client segment approved in advance by legal and investor relations, so what bankers say matches what a listed bank discloses to investors. It includes rules on what front-line staff may say about the institution’s condition, and contact center scripts with a surge staffing plan. It also includes a ranked list of the largest and most connected depositors, each with a named owner and a call plan.
All of this can be tested. A tabletop exercise that simulates a regional confidence shock can measure how long the institution takes to reach its top hundred depositors, give each an accurate coverage figure, and complete the first enrollments. Those three times are the client experience metrics that matter in a crisis. They belong in the resilience plan beside the liquidity stress test, and they should be retested whenever the core system or the coverage products change.
With hindsight
Spring 2023 proved to be the peak of the regional bank stress, though commercial real estate exposures kept pressure on some lenders afterward. The FDIC’s options report favored targeted increases in coverage for business payment accounts. Congress did not change the general limit, and bills to raise coverage for business transaction accounts were reintroduced in 2025 and 2026 without being enacted. Reciprocal deposit and insured sweep programs grew sharply, and more banks made coverage planning a routine part of relationship management. In July 2023 the banking agencies updated their liquidity guidance to stress readiness to borrow at the Federal Reserve’s discount window. A simplified FDIC rule for trust account coverage took effect in April 2024, which made coverage easier to explain for many households. The banks that came through best were those that could show clients their position and change it quickly.