- JPMorgan Chase executives warned that stricter regulations in the wake of this year’s bank failures would increase costs for consumers and businesses.
- JPMorgan CEO Jamie Dimon said other financial players could end up being winners.
- “This is great news for hedge funds, private equity, private credit, Apollo and Blackstone,” Dimon said, naming two of the biggest private equity players. “They dance in the street.”
Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Committee on Banking, Housing and Urban Affairs’ hearing entitled “Annual Oversight of the Nations Largest Banks” on September 22, 2022 at the Hart Building.
Tom Williams | CQ Roll Call, Inc. | Getty Images
JPMorgan Chase executives warned Friday that stricter regulations in the wake of three bank failures this year would increase costs for consumers and businesses, while forcing lenders to pull out of some businesses entirely.
When asked by Wells Fargo analyst Mike Mayo about the impact of changes proposed by Federal Reserve Vice Chairman Michael Barr in a speech earlier this week, JPMorgan CEO Jamie Dimon said other financial players could end up being winners .
“This is great news for hedge funds, private equity, private credit, Apollo and Blackstone,” Dimon said, naming two of the biggest private equity players. “They dance in the street.”
Blackstone and Apollo did not immediately respond to requests for comment on Dimon’s remarks.
Banks need to hold more capital to protect themselves against risky activities by US and international regulators. After the sudden collapse of Silicon Valley Bank in March, authorities are proposing higher capital requirements for banks with at least $100 billion in assets. But it also coincides with a long-awaited international rulebook propelled by the 2008 financial crisis dubbed the Basel III endgame.
“How much business will exit JPMorgan or the industry if capital ratios rise as much as may be suggested?” Mayo asked.
CFO Jeremy Barnum said banks would raise prices for end-users of credit and other products before ultimately deciding to exit some areas altogether.
“To the extent that we have pricing power and the higher capital requirements mean we are not generating the right return for shareholders, we will look to reprice the price and see how that holds up,” Barnum said.
“If the price adjustment isn’t successful, in some cases we have to do a remix, and that means exiting certain products and services,” he said. “That likely means that those products and services will leave the regulated space and go somewhere else.”
After the 2008 financial crisis, tightening regulations forced banks to withdraw from activities such as mortgages and student loans. For corporate and institutional players, takeovers and other large loans are now increasingly being funded by private equity players such as Blackstone and Apollo.
This has contributed to the rise of non-bank corporations, sometimes referred to as “shadow banks,” which worries some financial experts because they are generally less federally controlled than banks.