Following the failure of Silicon Valley Bank and Signature Bank last month, JPMorgan’s CEO Jamie Dimon told investors on Tuesday that the government and banks should cooperate to change industry regulations.
He added that the financial system needs to be changed so that one bank’s failure “does not cause undue panic and financial harm.”
These were Dimon’s first remarks following the failure of the two banks, which he made in a letter to JPMorgan Chase stockholders.
One of the few senior executives to remain at a Wall Street business since the sector almost imploded 15 years ago is Jamie Dimon, chairman and chief executive of the largest bank in the country and a survivor of the 2008 financial crisis.
In his letter, Dimon claimed that Silicon Valley Bank’s collapse might be attributed to several factors.
According to him, the bank’s management mismanaged the interest rate risk, leaving it overly vulnerable to the Federal Reserve’s rising interest rates.
Authorities like the Fed could not convince SVB to change its strategy before it was too late because they did not fully comprehend the hazards on its balance sheet at the time.
Finally, Dimon attributed a portion of the bank’s failure to venture capitalists and the IT industry, whose decision to withdraw money from SVB led to the bank experiencing a traditional bank run.
The unexpected concern was that a few venture capital firms controlled and moved SVB’s over 35,000 corporate clients and activity within them.
This is not intended to excuse bank management; it’s meant to demonstrate that many players didn’t have the best day.
In his letter, Dimon admitted what had been observed ad hoc throughout this crisis: depositors flocked to the country’s largest banks because they were deemed “too big to fail,” which may have given them an implicit government safety net during times of crisis.
Dimon, however, asserted that smaller and community banks are advantageous for the nation since they provide more local services than their larger competitors.
The idea that this disaster was beneficial to larger banks in any manner, he claimed, is incredible. “It is true that this bank crisis ‘benefited’ larger banks due to the flood of deposits they got from smaller institutions,” he said.
Dimon’s annual letter to shareholders is frequently a must-read for bankers, policymakers, and the media since he typically goes into considerable length about the problems affecting the industry and the U.S. and global economies.
During the 2008 financial crisis, Dimon was Washington’s go-to banker, purchasing Bear Stearns and Washington Mutual in government-mediated transactions to halt additional bank system panic.
Last month, when Silicon Valley and Signature Bank failed, the White House appealed to Dimon for help finding other institutions to save First Republic Bank, which was on the verge of failure.