: JPMorgan’s Jamie Dimon says banking crisis is ‘not over,’ but it will pass

“This wasn’t the finest hour for many players,” Dimon said in a section of the letter entitled, “Banking Turmoil and Regulatory Goals.”

“The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come,” Dimon said. “But importantly, recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks).”

Dimon’s comments came less than a month after the Federal Deposit Insurance Corp. took control of Silicon Valley Bank on March 10 after a run on deposits.

While bank management was not absolved by Dimon, he also said the rapid rise in interest rates by the Federal Reserve “placed heightened focus on the potential for rapid deterioration of the fair value of hold-to-maturity portfolios and, in this case, the lack of stickiness of certain uninsured deposits.”

Dimon said the U.S. government also provided an incentive for banks to own “very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements.”

On top of that, the Fed’s annual stress test for banks never factored in a rise in interest rates, Dimon said. 

“If done properly, banking regulations could be calibrated — adding virtually no additional risk — to make it easier for banks to make loans, intermediate markets, finance the economy, manage a run on their bank and fail if need be,” Dimon said.

The bank CEO said he sees little truth in the conclusion that bank regulations have been loosened, because capital requirements for large banks have been increasing for years.

“The debate should not always be about more or less regulation but about what mix of regulations will keep America’s banking system the best in the world,” Dimon said.

The recent banking woes reveal the need to consider issues around customer concentration, uninsured deposits, and potential limitations on the use of hold-to-maturity (HTM) portfolios, to weigh the health of a bank.

JPMorgan, along with the Federal Reserve, has provided a backstop for First Republic Bank FRC, +4.36%, a large regional lender that saw an outflow of deposits after Silicon Valley Bank.

JPMorgan Chase JPM, -0.12% stock is down 2.9% so far in 2023, compared to a 7.4% increase by the S&P 500 SPX, +0.37%.

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