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JPMorgan Chase & Co. CEO Jamie Dimon criticized new capital rules recently proposed by U.S. regulators, warning they could make bank stocks uninvestable and result in borrowers having to pay more on loans.
At issue is a proposal put forward by the Federal Reserve in July as part of the final implementation of international banking standards, the so-called Basel III final reforms.
Dimon is the latest Wall Street executive to oppose the Fed’s proposals. Last week, one of the industry’s leading lobby groups announced an advertising campaign called “Stop the Basel Endgame.”
JPMorgan Chase & Co.’s chief executive said the proposed changes would limit bank lending and push more bank activity into less regulated areas. Under the Fed’s proposal, lenders would be required to hold an additional $2 in capital for every $100 of risk-weighted assets.
“Do (regulators) want banks to be investable again?” Dimon told an industry conference organized by Barclays.
“I’m not going to be a big buyer of banks . . . I’m not going to be better than my weight, or whatever you want to call it,” he told an audience of analysts and investors.
Goldman Sachs CEO David Solomon also said, “These new capital rules have gone too far.”
“They will harm economic growth without materially improving safety and soundness,” Solomon told CNBC last week.
Bank of America Chief Financial Officer Alastair Borthwick also criticized on Monday, saying the Fed’s proposal could mean risk-weighted assets are double-counted in some cases, which could again limit bank lending. .
“I think American industry and business are going to make some important claims, and they’re going to ultimately pay the price,” Borthwick told a Barclays conference.
The United States has a history of adjusting to international banking standards, but it lags behind most jurisdictions that have completed Basel banking reforms.
Dimon said the U.S. written plan meant JPMorgan would have to hold 30% more capital than European banks.
The Fed is currently soliciting comments on proposed changes in a notice of proposed rulemaking (NPR), but Dimon is skeptical that any major changes will be made.
“Do you think NPR will make a difference?” Dimon said in his typically forthright style. “This is an argument between my academics and their academics. They’re going to do what they want to do no matter what. That’s all that’s going to happen.”
Two Fed governors spoke out against aspects of the proposal, warning they would hinder competition and financial markets and have other unintended consequences.
“I am concerned that today’s Basel III proposals will increase the cost of credit and impede market functioning, with no clear benefit to the resilience of the financial system,” Christopher Waller said in late July when he raised objections to the rule proposals. “continue.
Federal Reserve Chairman Jay Powell supports the proposals. However, in July he cited the need to balance the benefits and costs associated with higher capital requirements, saying this could be achieved through “public input and careful consideration”.
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