Dimon blasts higher capital requirements as CEOs head to capitol
Jamie Dimon took aim at higher capital requirements ahead of a pair of congressional hearings this week, calling an upcoming increase for JPMorgan Chase & Co. “bad for America.”
Dimon, the longtime chief executive officer of the biggest US bank, is set to appear in Washington on Wednesday and Thursday alongside his counterparts from major lenders including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. for testimony focused on consumer banking. In his wide-ranging prepared remarks, he touted the role his firm plays in the global economy and warned of harm from “arbitrary increases in capital requirements.”
“The continued upward trajectory of regulatory capital requirements on America’s already fortified largest banks, particularly when not reflective of actual risk, is itself becoming a significant economic risk,” Dimon wrote. “This is bad for America, as it handicaps regulated banks at precisely the wrong time, causing them to be capital constrained and reduce growth in areas like lending, as the country enters difficult economic conditions.”
New York-based JPMorgan temporarily suspended share buybacks in July to quickly meet higher capital requirements tied to a harsher stress-test result and a previously flagged increase to its buffer for systemic importance. Dimon has long criticized capital-requirement increases, arguing among other things that they put US banks at a disadvantage relative to international competitors.
Michael Barr, the Federal Reserve’s vice chair for supervision, has said that US officials are reviewing bank capital requirements and committed to putting in place strictures that align with the global Basel III standards. Barr, who took over as the Fed’s top bank watchdog in July, has also signaled that he supports tougher restrictions for bigger, systemically important lenders than smaller institutions.
“As firms increase in systemic importance, the social cost of their failure grows,” Barr said in a Sept. 7 speech. “Regulations should be designed to require firms to internalize the costs that their potential failure would impose on the broader financial system and thus on businesses and households.”
Dimon also gave his view on the US economy in his written testimony, calling it “a classic tale of two cities.” On one hand, JPMorgan is still seeing strong consumer spending and balance sheets, and jobs reports continue to be “encouraging,” according to the CEO. Still, persistent inflation and the Fed’s quantitative tightening and interest-rate hikes represent “storm clouds,” he said.
Overdraft fees, which are expected to be a key topic at this week’s hearings, got their own section in Dimon’s remarks. He touted improvements to JPMorgan’s overdraft program since last year, when Dimon clashed with Senator Elizabeth Warren over the practice, but defended the service as something customers want to help them make critical payments.