by JPMorgan Chase CEO Jamie Dimon said in his annual letter to shareholders on Tuesday that the deposit crisis rocking the banking industry is “not over yet” and could affect the financial services industry “for years to come. “.
Although Dimon said the bank runs that led to the sudden collapse of Silicon Valley Bank (SVB) and Signature Bank were far less severe than the 2008 financial crisis, he called for tougher financial regulation aimed at preventing “undue panic” when lenders fail.
“Resolution and recovery regulations have not worked particularly well during the recent crisis – we need to provide clarity and reassurance on both the unwinding process and the measures to reduce the risk of further bank runs,” he said. he writes.
Dimon, who heads the nation’s largest bank, is a veteran of the housing crash and global financial crisis that rocked Wall Street 15 years ago, and his annual letter is read carefully by other bank executives and policymakers. .
“Unknown Risk”
Regulators shut down SVB, which catered to Silicon Valley tech companies and venture capital firms, on March 10 after depositors withdrew $42 billion of the institution in a single day. The surprising failure sparked a run on smaller banks, leading to the collapse of Signature Bank of New York two days later, while wayward depositors from other regional banks also rushed to withdraw cash.
“The unknown risk was that SVB’s more than 35,000 corporate clients – and their businesses – would be controlled by a small number of venture capitalists and move their deposits at the same pace,” Dimon said.
In the hope of stemming the crisis, JPMorgan Chase and 10 other Wall Street firms filed $30 billion in First Republic Bank of San Francisco to help her stay afloat. Meanwhile, Swiss regulators negotiated Takeover of Credit Suisse by UBSwhich had suffered years of financial loss before the crisis.
Although the general panic in the banking sector has receded, the fallout will continue, Dimon said in his missive to JPMorgan shareholders. “As I write this letter, the current crisis is not yet over, and even when it is behind us, it will have repercussions for years to come.”
“Any crisis that hurts Americans’ confidence in their banks hurts all banks,” he added.
By contrast, Dimon warned against a heavy-handed regulatory response to bank failures. Alluding to the 2008 banking crash that razed Lehman Brothers and nearly brought down other major Wall Street firms, Dimon said:
“Major investment banks, Fannie Mae and Freddie Mac, almost every savings and loan institution, off-balance sheet vehicles, AIG and banks around the world have all gone bankrupt. This current banking crisis involves far less ‘financial players and fewer problems that need to be solved.’
Dimon also detailed how JPMorgan is investing in advanced artificial intelligence tools such as ChatGPT. The banking giant uses the technology in global payment processing and is exploring how to use it for risk analysis, marketing and fraud analysis, among other uses.
To this end, JPMorgan has assembled a group of more than 900 AI data scientists and 600 machine learning engineers.
“We envision new ways to augment and empower employees with AI through collaborative tools and human-centric workflow, leveraging tools like big language models , including ChatGPT,” Dimon said.
The Associated Press contributed to this report.
