JPMorgan Chase CEO Jamie Dimon said that the banking crisis triggered by the March collapses of Silicon Valley Bank and Signature Bank has not reached its limit and will have an impact on the state of affairs in the economy over the next few years.
The CEO of one of the largest financial institutions in the United States outlined the forecast, which does not provide reasons for optimism about the near-term prospects of the banking industry, in an annual letter to shareholders.
Jamie Dimon said that the crisis situation in the financial system had a negative impact on all banks, regardless of their size and status. He also called on lawmakers to analyze their actions more carefully and rationally before making decisions on tightening regulatory measures.
The CEO of JPMorgan noted that the failures of SVB and Signature Bank did not become a problem only for these banks and transformed into a systemic crisis trend. He stressed that clients against the background of these events began to take measures to ensure the security of their funds, transferring money to large financial institutions.
In a note published in March, Wells Fargo banking analyst Mike Mayo wrote that the current situation in a certain sense is beneficial for JPMorgan. He noted that the financial indicators of this representative of the banking system are growing against the background of an increase in deposits in times of total uncertainty.
Mike Mayo acknowledged the fact that any crisis in the banking sector affects the entire industry, as such situations undermine customer confidence. But he notes that large financial institutions in such cases find themselves in a more advantageous position since there is an influx of deposits from small banks in their direction. At the same time, the analyst focuses on the fact that statements about the crisis as a positive phenomenon for major players are absurd.
The failures of SVB and Signature Bank, according to Jamie Dimon, are not substantially due to the fact that these banks carried out activities in circumvention of regulations. He noted that the SVB policy, which provides for high-interest rates and a large volume of uninsured deposits, was not a secret for regulators and the market as a whole.
Jamie Dimon says that the current regulatory framework can lull the vigilance of banks and does not contain the tools to solve the systemic problems of the banking sector. The head of one of the largest financial institutions in the United States with a high degree of probability admits a change in this base in response to the crisis. He noted that in this case, sharp and politically motivated decisions should be avoided, the result of which is often the opposite of the original intentions.
Jamie Dimon says that sometimes regulatory changes concern one part of the system, but in the course of practical application they affect the entire industry and aggravate the situation.
The Federal Deposit Insurance Corporation said it would propose new changes to the rules in May. The Federal Reserve is conducting an internal review to understand what changes are needed. Legislators in Congress suggest the possibility of developing new legislation to regulate the activities of banks.
Jamie Dimon says the debate should not be about the degree of regulatory rigidity, but about which combination of rules is most effective for preserving the American banking system.
As we have reported earlier, JPMorgan Funds Metaverse Payments Platform Tilia.