JP Morgan has agreed a deal with regulators to acquire the “substantial majority” of First Republic’s assets, including $173 billion (£138bn) of loans.
The California Department of Financial Protection and Innovation announced early on Monday it had taken possession of First Republic and the Federal Deposit Insurance Corporation (FDIC) would act as its receiver.
The collapse follows the failures of US lenders Silicon Valley Bank and Signature Bank after investors withdrew funds.
The US central bank, the Federal Reserve, was forced to step in with emergency measures to stabilize the markets to prevent more funds being withdrawn amid growing fears of a new wider banking crisis.
The turmoil that ensued also brought down Swiss giant Credit Suisse and severely rattled investors, resulting in an uneasy time for share indexes for several weeks.
May Day holidays in many countries on Monday limited initial global market reactions to the latest collapse, with Tokyo’s Nikkei 225 index adding 0.9% and the S&P/ASX 200 in Sydney advancing 0.5%.
The UK, Europe and many other markets were closed.
Futures for the S&P 500 and the Dow industrials edged less than 0.1% higher.
US regulators said in a statement JP Morgan will take most of First Republic’s assets and all the deposits, including uninsured ones.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman and CEO of JPMorgan Chase.