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Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing entitled Annual Oversight of the Nations Largest Banks, in the Hart Building on September 22, 2022.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
c. B. Morgan Chase Executives warned Friday that tougher regulations in the wake of the three bank failures this year will raise costs for consumers and businesses, while forcing lenders to exit some companies entirely.
when asked before Wells Fargo Analyst Mike Mayo on the impact of changes proposed by Federal Reserve Vice Chairman for Supervision Michael Barr in a letter Earlier this week, JPMorgan CEO Jamie Dimon said other financial players could end up as winners.
This is great news for hedge funds, private equity and private credit. ApolloAnd Black stone“They’re dancing in the streets,” Dimon said, referring to two of the largest private equity firms.
Blackstone and Apollo did not immediately respond to requests for comment on Damon’s remarks.
Banks face requirements to hold more capital as a protection against risky activities from both US and international regulators. Authorities are proposing higher capital requirements for banks with at least $100 billion in assets after the sudden collapse of the Silicon Valley bank in March. But this also coincides with the long-awaited set of international rules spurred by the 2008 financial crisis referred to as Basel III. game over.
The rise of shadow banking
“How much business would JP Morgan or the industry have left if capital ratios were raised as much as suggested?” May asked.
Chief Financial Officer Jeremy Barnum said banks would raise prices on end users for loans and other products before eventually deciding to leave some regions entirely.
“To the extent that we have pricing power and higher capital requirements mean we’re not generating the right shareholder return, we’ll try to re-pricing and see how that holds,” Barnum said.
“If repricing doesn’t work, in some cases we will have to remix and that means exiting certain products and services,” he said. “It may mean that those products and services leave the regulated perimeter and go elsewhere.”
After the 2008 financial crisis, tightened rules forced banks to withdraw from activities including mortgages and student loans. For companies and institutional players, acquisitions and other huge loans are now increasingly funded by private equity firms such as Blackstone and Apollo.
This has contributed to the emergence of non-bank actors, sometimes referred to as the “shadow banking” industry, which has worried some financial experts because they generally face less federal scrutiny than banks.
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