Jamie Dimon, longtime CEO of JPMorgan Chase, warned in his current annual letter to shareholders that the collapse of Silicon Valley Financial institution may have long-term financial penalties, however, on the upside, “current occasions are nothing like what occurred throughout the 2008 world monetary disaster.”
Whereas the SVB fiasco has largely light from information protection outdoors of industry-specific shops, “The present disaster shouldn’t be but over, and even when it’s behind us, there will likely be repercussions from it for years to come back,” Dimon wrote
Silicon Valley Financial institution was closed by regulators on March 10 after depositors withdrew billions of {dollars} from the financial institution, which had been a mainstay of the Silicon Valley startup ecosystem. Two days after Silicon Valley Financial institution was closed, Signature Financial institution was closed by New York state banking regulators, whereas Swiss regulators brokered a buy of Credit score Suisse by UBS.
JPMorgan partnered with different massive banks to deposit $30 billion at First Republic, one other regional lender that teetered on the precipice however has since stabilized.
For the reason that twin failures of regional banks in March, anxious depositors have moved billions of {dollars} to banks deemed “too large to fail,” however Dimon mentioned JPMorgan needs to strengthen the smaller banks for the good thing about the entire monetary system.
“Any disaster that damages People’ belief of their banks damages all banks – a incontrovertible fact that was recognized even earlier than this disaster. Whereas it’s true that this financial institution disaster ‘benefited’ bigger banks as a result of influx of deposits they acquired from smaller establishments, the notion that this meltdown was good for them in any manner is absurd,” Dimon wrote.
Dangers “Hiding in Plain Sight”
Dimon famous that many of the dangers dealing with Silicon Valley Financial institution, together with the potential losses from held-to-maturity bonds, had been “hiding in plain sight.” The unknown variable was the interconnected community of SVB’s deposit, he mentioned.
“The current failures of Silicon Valley Financial institution (SVB) in america and Credit score Suisse in Europe, and the associated stress within the banking system, underscore that merely satisfying regulatory necessities shouldn’t be adequate. Dangers are considerable, and managing these dangers requires fixed and vigilant scrutiny because the world evolves,” Dimon wrote.
He urged regulators to be “much less educational, extra collaborative,” noting that the held-to-maturity bonds now an issue for a lot of banks are literally extremely rated authorities debt that scores effectively underneath present guidelines however that current stress assessments didn’t sport out a fast rise in rates of interest.
“This isn’t to absolve financial institution administration – it’s simply to clarify that this wasn’t the best hour for a lot of gamers. All of those colliding components grew to become critically essential when {the marketplace}, score companies and depositors centered on them,” Dimon wrote.
He cautioned policymakers to keep away from new guidelines that unintentionally push some monetary companies to nonbanks and so-called shadow banks.
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