• JPMorgan CEO Jamie Dimon believes there could be more pain ahead for United States banks if the Federal Reserve goes into crisis mode with overregulation.
• Dimon argued that more regulations make it harder for banks to conduct business, noting that “some of these community banks now have more compliance people than loan officers.”
• Instead, he proposed taking a holistic approach when modifying regulations and questioned the effectiveness of stress tests.
JPMorgan CEO Warns Against Overregulation
JPMorgan Chase Chair and CEO Jamie Dimon recently warned against overregulation by the Federal Reserve in a Bloomberg television interview on May 11. He believes that the current banking crisis could become worse for United States banks if the Federal Reserve continues to add more rules and regulations without taking proactive measures.
Banks Struggling Under Regulatory Burden
Dimon noted that adding more regulations to the Federal Reserve’s already 200,000-page long stress test is not the solution to the current banking crisis, as it makes it harder for banks to conduct business. He highlighted how some community banks now have more compliance people than loan officers as a result of this regulatory burden.
Call For Holistic Approach To Regulation
Instead of simply creating further rules and regulations, Dimon proposed taking a holistic approach when modifying them so as to ensure their effectiveness. He also questioned the effectiveness of stress tests, noting that companies could end up focusing too heavily on them instead of other important measures such as mitigating risk and ensuring sound management practices.
Recent Bank Collapses
In just the first few months of 2021 alone, three major U.S. banks have collapsed — Signature Bank, Silicon Valley Bank and First Republic Bank — highlighting how serious this situation is becoming.
CEOs And Board Members Blamed For Crisis
Dimon argued that supervisors usually focus on whether or not companies are abiding by regulations rather than looking into potential mismanagement issues among CEOs and board members which can lead to bank collapses like those seen recently in 2021. Therefore, he believes these should be held accountable instead of simply adding further regulation without addressing underlying problems in management practices or risk mitigation strategies at individual institutions first.