The CEO of JPMorgan Chase, which recently took over the failed First Republic Bank, believes there could be more pain for US banks if the Federal Reserve goes into crisis mode with excessive regulation.
On a Bloomberg TV interview On May 11, JPMorgan Chase Chairman and CEO Jamie Dimon said he thinks it's "going to get worse for the banks" unless the Federal Reserve takes proactive steps beyond simply creating more regulations.
In the first months of the year alone, three major US banks collapsed: Signature Bank, Silicon Valley Bank and First Republic Bank.
Dimon said it is "a supervisory issue", with the banks' chief executives and board members being "to blame", as supervisors generally focus on whether they are complying with regulations.
However, Dimon believes that adding more regulations to the Federal Reserve's stress test, which is already 200,000 pages long, is not the solution to the current banking crisis.
He argued that more regulations make it harder for banks to do business, noting that “some of these community banks now have more compliance people than loan officers.”
Instead, he proposed taking a holistic approach when amending the regulations, saying:
“At one point, they are finding it harder to do business. There are already hundreds of rules in place.”
In addition, he questioned the effectiveness of stress tests, since companies that focus entirely on "that stress test" might be missing issues, such as historical events that "always happen" again.
He believes that focusing solely on a stress test gives a "false sense of security."
Dimon suggested that the Federal Reserve never saw emerging problems in the banking industry, noting that "no Fed governors predicted" the banking crisis.
Related: JPMorgan sees advantages in deposit tokens over stablecoins for commercial bank blockchains
This is not the first time that a JPMorgan executive has voiced problems with banking regulations in recent times.
Bob Michele, chief investment officer at JP Morgan Asset Management, stated in an April 27 Bloomberg television interview that First Republic Bank liquidity problems "It should never have happened" as banking is the "most regulated capitalized industry on the planet."
More recently, on May 1 it was reported that JPMorgan was ready to acquire The assets of First Republic Bank (FRB), after their previous efforts to bail it out failed.
1/ On Monday, JPMorgan Chase acquired a large 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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