JPMorgan Chase CEO Jamie Dimon warned that stricter capital requirements proposed by U.S. regulators risked bank stocks becoming uninvestable and could cause lenders to pull back, hindering economic growth, Bloomberg and Reuters reported Monday.
While speaking at an industry conference organized by Barclays in New York, Dimon called the long-awaited proposal that requires banks to set aside more capital for times of crisis "hugely disappointing" and lacking in transparency.
"Do [regulators] want banks ever to be investable again?" Dimon said. "I wouldn't be a big buyer of banks ... I'd be no better than equal weight, or whatever you call it," he noted.
Dimon questioned the rationale behind implementing the rules. "All I want is fairness, transparency, openness," he said.
The issue in question is the proposal outlined by the Federal Reserve in July that would update the 2010 Basel III standards created in the wake of the 2008-09 financial crisis. Under the proposal, the U.S.'s eight global systemically important banks would see a nearly 19% increase in the amount of capital they would be required to hold. In contrast, those with between $250 billion and $1 trillion in assets saw about a 10% uptick. Banks with assets between $100 billion and $250 billion would see a 5% hike in their holdings. However, banks with less than $100 billion would be exempt from the rule.
Dimon warned that the measure will make activities like mortgages and small-business lending harder for banks, and questioned whether regulators learned proper lessons from the bank failures earlier this year, according to Bloomberg.
The Fed's proposal requires lenders to hold an extra $2 of capital for every $100 of risk-weighted assets, while Dimon noted JPMorgan would have to hold 30% more capital than a European bank, according to the Financial Times.
Alastair Borthwick, Bank of America’s CFO, pointed out that the Fed's proposal could lead to double counting of risk-weighted assets, which could lead to restricting bank lending, according to the FT.
"I think there's going to be some important points of advocacy on the part of industry and by businesses in America, who are the ones who ultimately are going to pay for this," Borthwick said at the conference.
The Fed is seeking comments on a notice of proposed rulemaking, but Dimon expressed concern about whether the regulators would incorporate any changes.
"Do you think the NPRs are going to make a shit of difference?" Dimon told the audience. "It's my academics arguing with their academics. They're going to do what they want anyway. That's all that's going to happen."
Dimon cautioned about the overall economic environment, though he said the consumer and banking industry remain strong.
"I just think people make a mistake to look at real-time numbers and not look at the future. And the future has quantitative tightening," he said. "We've been spending money like drunken sailors around the world, this war in Ukraine is still going on."
Dimon added that it was a big mistake to assume that the market would be booming for years to come, according to Reuters.
