JPMorgan CEO Jamie Dimon warns banking sector stress caused by SVB implosion IS a ‘crisis’ and will have ‘years of repercussions’ – but says it is ‘nothing like the 2008 financial crash’
- Market turmoil was sparked by the March 10 collapse of Silicon Valley Bank
- Mr Dimon tried to reassure investors but said the current crisis was ‘not over’
- He argued for a more ‘joint’ approach to regulation to protect the industry
The JP Morgan boss has said the banking sector is in “crisis” and warned there will be “years-long consequences” after a series of bank failures.
But Jamie Dimon tried to reassure investors, adding that the recent market turmoil was “nothing like what happened during the 2008 financial crisis.”
Markets were thrown into chaos by the collapse of Silicon Valley Bank (SVB) on March 10.
Two other US lenders – Signature and Silvergate – also failed, while JP Morgan and other Wall Street rivals pumped $30 billion into San Francisco-based First Republic Bank to prevent more dominoes from falling.
The stress on regional banks has led analysts to suggest bigger banks could cash in on the crisis, but Mr Dimon said supporting smaller rivals would benefit everyone.
JP Morgan CEO Jamie Dimon (pictured above with wife Judith Kent) warned the banking sector was in ‘crisis’ following the collapse of several US lenders
The Wall Street boss tried to reassure shareholders in a letter saying the recent market turmoil was “nothing like” the 2008 financial crisis
JP Morgan’s CEO said in a letter to shareholders on Tuesday: “The current crisis is not over, and even if it is behind us, it will have repercussions for years to come.”
He added, “Any crisis that damages Americans’ confidence in their banks hurts all banks — a fact that was known even before this crisis.
“While it is true that larger banks ‘benefited’ from this banking crisis through the influx of deposits they received from smaller institutions, it is absurd that this collapse was in any way good for them.”
Mr. Dimon also called for a more collaborative approach to regulation to protect the industry going forward.
He wrote: “The recent failures of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, and the associated stress in the banking system, underline that simply complying with regulatory requirements is not enough.
“Risks abound, and managing those risks requires constant and vigilant research as the world evolves.”
Mr Dimon said it was a challenging year globally due to the war in Ukraine and rising geopolitical tensions with China.
But he added that 2022 had been “surprisingly” strong for JPMorgan. Although the bank’s stock fell 15 percent during the calendar year, it generated more than $37 billion in net income.
His intervention comes after the head of the International Monetary Fund warned of heightened risks to the stability of the financial system.
Markets were thrown into chaos by the collapse of Silicon Valley Bank on March 10
The ensuing turmoil saw the bankruptcy of two other US lenders, while there was an emergency takeover of Credit Suisse by Swiss rival UBS
Kristalina Georgieva told a conference in Beijing last week that uncertainty in the global economy remained “exceptionally high” and that 2023 would be “another challenging year.”
She said: “The rapid transition from a prolonged period of low interest rates to much higher rates – necessary to fight inflation – inevitably creates tensions and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies.”
Despite this, Ms Georgieva said policymakers and central bankers had acted ‘decisively’ to counter risks to the financial system, but warned that high uncertainty meant ‘vigilance’ was required.
It followed another dramatic episode for the banking industry.
Shares of Deutsche Bank plummeted on fears it could be next to fail following a bailout takeover of Credit Suisse by Swiss rival UBS. It prompted German Chancellor Olaf Scholz to allay concerns about Deutsche Bank, saying it was “very profitable” and there was “no cause for concern.”