Jamie Dimon, CEO of JPMorgan Chase, testifies throughout the Senate Banking, Housing, and City Affairs Committee listening to titled Annual Oversight of the Nations Largest Banks, in Hart Constructing on Sept. 22, 2022.
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JPMorgan Chase executives warned Friday that more durable laws within the wake of a trio of financial institution failures this 12 months would increase prices for customers and companies, whereas forcing lenders to exit some companies solely.
When requested by Wells Fargo analyst Mike Mayo concerning the influence of adjustments proposed by Federal Reserve Vice Chair for Supervision Michael Barr in a speech earlier this week, JPMorgan CEO Jamie Dimon stated that different monetary gamers might find yourself winners.
“That is nice information for hedge funds, personal fairness, personal credit score, Apollo, Blackstone,” Dimon stated, naming two of the biggest personal fairness gamers. “They’re dancing within the streets.”
Blackstone and Apollo did not instantly reply to requests for touch upon Dimon’s remarks.
Banks face necessities to carry extra capital as a cushion towards dangerous actions from each U.S. and worldwide regulators. Authorities are proposing increased capital necessities for banks with no less than $100 billion in belongings after the sudden collapse of Silicon Valley Financial institution in March. However that additionally coincides with a long-awaited set of worldwide guidelines spurred by the 2008 monetary disaster known as the Basel III endgame.
Rise of the shadow banks
“How a lot enterprise leaves JPMorgan or the business if capital ratios go up as a lot as doubtlessly proposed?” Mayo requested.
CFO Jeremy Barnum stated that banks would increase costs on finish customers of loans and different merchandise earlier than in the end deciding to go away some areas solely.
“To the extent we’ve got pricing energy and the upper capital necessities implies that we’re not producing the precise return for shareholders, we’ll attempt to reprice and see how that sticks,” Barnum stated.
“If the repricing just isn’t profitable, then in some circumstances, we should remix and meaning getting out of sure services,” he stated. “That in all probability implies that these services go away the regulated perimeter and go elsewhere.”
After the 2008 monetary disaster, heightened guidelines pressured banks to tug again from actions together with mortgages and pupil loans. For firms and institutional gamers, acquisitions and different large loans at the moment are more and more funded by personal fairness gamers like Blackstone and Apollo.
That has contributed to the rise of non-bank gamers, typically known as the “shadow banking” business, which has involved some monetary consultants as a result of they typically face decrease federal scrutiny than banks.