JPMorgan Chase CEO, Jamie Dimon, has expressed concern about the potential repercussions for US banks should the Federal Reserve resort to an overregulatory approach in response to crisis. This comes in the wake of JPMorgan’s recent acquisition of the beleaguered First Republic Bank.
In an interview with Bloomberg TV on May 11, Dimon warned that the banking sector could face further difficulties unless the Federal Reserve adopts more proactive strategies, as opposed to merely increasing regulations.
The initial months of the year have already seen the collapse of three major US banks: Signature Bank, Silicon Valley Bank, and First Republic Bank.
Dimon attributed these failures to a problem with supervision, arguing that the onus should be on the bank CEOs and board members, who are usually the focus of compliance with regulations.
He voiced skepticism about the efficacy of adding more regulations to the Federal Reserve’s already voluminous 200,000-page stress test, arguing that this is not the remedy for the ongoing banking crisis.
According to Dimon, increasing regulations impedes banks’ business operations, pointing out that several community banks now employ more compliance personnel than loan officers.
He advocated for a comprehensive approach to regulatory reform, observing that existing rules already number in the hundreds and may hinder banks’ operations.
Dimon also questioned the reliability of stress tests, suggesting that companies that concentrate solely on passing these tests may neglect other issues, including recurring historical events. He warned that overreliance on a single stress test can instill a deceptive sense of security.
Dimon criticized the Federal Reserve for its apparent lack of foresight, stating that none of the Fed governors had predicted the banking crisis.
This isn’t the first time a JPMorgan executive has aired grievances about banking regulations. On April 27, Bob Michele, the chief investment officer of J.P. Morgan Asset Management, commented in a Bloomberg TV interview that the liquidity issues of First Republic Bank should not have occurred given the stringent regulatory environment in the banking industry.
More recently, on May 1, it was announced that JPMorgan would be acquiring the assets of First Republic Bank (FRB) after unsuccessful attempts to rescue it.
