In March, when three big lenders failed and depositors withdrew their money from institutions across the nation, the industry was rocked. Dimon has previously criticised the authorities’ stance and called for higher capital requirements.
In fact, Dimon stated to investors in July that nonbank lenders who were exempt from capital regulations were already celebrating their competitive advantage by “dancing in the streets.”
On Monday, he made some of the same points again while delivering a speech at a Barclays conference in New York. According to him, JPMorgan will need “to hold 30% more capital than a European bank” as a result of the regulations, which won’t go into effect entirely until 2028.
The proposed revisions will result in an overall 16% increase in capital requirements for banks. The biggest banks would be most impacted by the rise, according to regulators, and the majority already have sufficient capital to comply. Banks must keep capital as a reserve to cover any losses.
These modifications are a part of Basel III, the international agreement that was created during the 2008 financial crisis by the Basel Committee on Banking Supervision, and is known as Basel III in the United States.
The Bank for International Settlements in Basel, Switzerland, called on a committee to establish international regulatory capital criteria so that banks would have adequate capital on hand to weather crises. Although the COVID-19 pandemic occurred after the latest iteration of this agreement was reached in 2017, there was a delay in its implementation in the US.
“What the goddamn hell was the point of Basel in the first place?” According to Dimon, “if American banks have to hold 30% more than competitors around the world, that is a huge negative over a long period of time.”
Dimon humorously responded when asked if he had spoken to regulators about the proposed capital requirement that he had been “on vacation” and “trying to de-aggravate myself from this kind of thing.”
“I want them to act honourably. To me, it’s simply obvious that they didn’t,” he continued.
Additionally, Dimon issued some cautions regarding the path of the economy.
The US consumer and business climate is still “quite favourable,” he continued, but “I’m also rather cautious, in case you didn’t get it, about the environment. more circumspect than average. I believe there are more chances for an accident than most people realise.
At many regional banks, net interest income, a crucial indicator of profitability, has been declining.
He predicted that bank deposits would decrease and that net interest revenue would drop to a different level. Just when, we’re not sure.
Dimon stated that JPMorgan Chase is maintaining its forecast of $87 billion in net interest income for the entire year.
In the third quarter, JPMorgan’s trading business is anticipated to be “down 1% or 2%” from the second quarter and the year prior, whereas “it’s something like that” for investment banking.
It is serving as one of the lead bankers for the initial public offerings of the chipmaker ARM and the grocery e-commerce firm Instacart, with Goldman Sachs (GS).
If you can go public, my advise to a company is to do so, Dimon stated. You must go public if you choose to do so. Don’t hesitate too long. I believe there are still significant and serious uncertainties in the future.