JPMorgan’s Jamie Dimon says US banking turmoil not over, sees ‘repercussions for years to return’

The US banking crisis is ongoing and can have results for years to return as a consequence of policymakers’ ‘knee-jerk’ responses, JPMorgan Chase & Co CEO Jamie Dimon wrote in a letter to shareholders on Tuesday.

“The present disaster just isn’t but over, and even when it’s behind us, there shall be repercussions from it for years to return,” Dimon wrote in a 43-page annual message protecting a spread of subjects from JPMorgan’s efficiency to geopolitics and regulation.

“This can be very essential that we ayoid knee-jerk, whack-a-mole or politically motivated responses that always end in reaching the other of what individuals meant,” he stated whereas hinting rules stoked the present banking turmoil.

Storm clouds are nonetheless threatening the financial system as they did a yr in the past, stated Dimon, the chief government of the biggest US lender. And the banking system is beneath renewed stress after the failure of Silicon Valley Financial institution and Credit score Suisse’s rescue by UBS final month.

“The market’s odds of a recession have elevated,” Dimon wrote. “And whereas that is nothing like 2008, it’s not clear when this present disaster will finish. It has provoked numerous jitters out there and can clearly trigger some tightening of economic situations as banks and different lenders change into extra conservative.”

Even so, it’s unclear whether or not the disruptions will sluggish the buyer spending that drives the U.S. financial system, Dimon wrote.

The dangers that led to the present disaster have been “hiding in plain sight,” Dimon wrote, citing the rate of interest publicity and degree of uninsured deposits at Silicon Valley Financial institution.

However he downplayed similarities to the worldwide monetary disaster. Whereas the 2008 crash hit massive banks, mortgage lenders and insurers with international interconnections, “this present banking disaster includes far fewer monetary gamers and fewer points that must be resolved,” Dimon stated.

After taking the helm of JPMorgan in 2006, Dimon presided over the financial institution’s crisis-era acquisitions of troubled funding financial institution Bear Stearns and Washington Mutual, the financial savings and mortgage whose failure was the biggest in U.S. historical past.

As the present disaster unfolded, Dimon once more performed a central function, serving to to rearrange a $30 billion lifeline for First Republic Financial institution FRC.N from 11 massive lenders.

JPMorgan, Financial institution of America Corp, Citigroup and Wells Fargo & Co dedicated $5 billion every, adopted by Morgan Stanley and Goldman Sachs with $2.5 billion apiece.

Any new rules in response to the most recent turmoil needs to be “considerate,” together with clearer guidelines for coping with failed banks, Dimon wrote. “Erratic stress take a look at capital necessities and fixed uncertainty round future rules harm the banking system with out making it safer.”

JPMorgan’s shares have fallen virtually 3% this yr, in distinction with a 13% decline in an S&P index .SPXBK of broader financial institution shares.

The corporate, alongside different lending giants Financial institution of America and Citigroup, have been flooded with deposits after the collapse of Silicon Valley Financial institution in March, sources acquainted with the state of affairs stated on the time.

Dimon additionally took goal at nonbank monetary companies, which have change into more and more aggressive with banks in offering mortgages, bank cards and market-making.

“Would nonbank credit-providing establishments be capable to present credit score when their shoppers want them essentially the most?” he requested. “I personally doubt that lots of them might.”

“The failures of SVB and Credit score Suisse have considerably modified the market’s expectations. The market’s odds of a recession have elevated. And whereas that is nothing like 2008, it’s not clear when this present disaster will finish,” stated Dimon.

“We want banks to be enticing investments. It’s within the curiosity of the monetary system that banks not change into un-investable due to uncertainty round rules,” he added.

With inputs from Reuters


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