The CEO of JPMorgan Chase – who recently took over the failed First Republic Bank – believes there is more pain ahead for US banks if the Federal Reserve goes into crisis mode with overregulation.
In a Bloomberg television interview on May 11, JPMorgan Chase Chair and CEO Jamie Dimon said he believes it’s “going to get worse for banks” unless the Federal Reserve takes proactive steps beyond creating a many regulations.
In just the first few months of the year, three major US banks collapsed – Signature Bank, Silicon Valley Bank and First Republic Bank.
Dimon said it’s a “management problem,” with bank CEOs and board members being “the people to blame,” because supervisors often focus on whether they’re following regulations.
However, Dimon believes that adding more regulations to the Federal Reserve’s 200,000-page long stress test is not the solution to the current banking crisis.
He argued that more regulations make it harder for banks to conduct business, saying “some of these community banks now have more compliance people than loan officers.”
Instead, he suggested taking a holistic approach when changing regulations, saying:
“At some point, it makes it difficult for them to do business. There are already hundreds of rules in place.”
He even questioned the effectiveness of stress tests, because companies that focus entirely on “that one stress test” may miss issues, such as historical events that “always happen” again.
He believes that focusing only on a stress test gives a “false sense of security.”
Dimon suggested that the Federal Reserve never saw the issues emerging in the banking industry, saying that “no Fed governor predicted” the banking crisis.
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This is not the first time that a JPMorgan executive has raised issues with banking regulations in recent times.
Bob Michele, the chief investment officer of JP Morgan Asset Management, stated in an April 27 television interview with Bloomberg that First Republic Bank’s liquidity issues “shouldn’t have happened,” because banking is “most regulated industrial capital on the planet.”
More recently, it was reported on May 1 that JPMorgan is set to acquire the assets of First Republic Bank (FRB), after earlier efforts to save it failed.
1/ On Monday, JPMorgan Chase acquired a substantial majority of the assets and assumed certain liabilities of First Republic Bank from the FDIC. https://t.co/2a3bnTJJJW
– First Republic (@firstrepublic) May 5, 2023
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