JPMorgan Chase CEO Jamie Dimon said in his annual letter to shareholders on Tuesday that the deposit crisis rattling the banking industry is “not yet over” and could affect the financial services sector “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 dire than the 2008 financial crisis, he called for stronger financial regulations aimed at preventing “undue panic” when lenders fail.
“Resolution and recovery regulations did not work particularly well during the recent crisis — we should bring clarity and reassurance to both the unwinding process and measures to reduce the risk of additional bank runs,” he wrote.
Dimon, who heads the nation’s largest bank, is a veteran of the housing crash and ensuing global financial crisis that shook Wall Street 15 years ago, and his annual letter is closely read by other banking executives and policy makers.
“Unknown risk”
Regulators shuttered SVB, which catered to Silicon Valley tech companies and venture capital firms, on March 10 after depositors withdrew $42 billion from the institution in a single day. The startling failure triggered a run at smaller banks, leading to the collapse of New York’s Signature Bank two days later, while skittish depositors at other regional banks also raced to withdraw money.
“The unknown risk was that SVB’s over 35,000 corporate clients — and activity within them — were controlled by a small number of venture capital companies and moved their deposits in lockstep,” Dimon said.
In hopes of stemming the crisis, JPMorgan Chase and 10 other Wall Street firms deposited $30 billion into San Francisco’s First Republic Bank to help it stay afloat. Meanwhile, Swiss regulators brokered UBS’ purchase of Credit Suisse, which had suffered years of financial losses before the crisis.
Although the broader banking industry panic 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, there will be repercussions from it for years to come.”
“Any crisis that damages Americans’ trust in their banks damages all banks,” he added.
By contrast, Dimon cautioned against a heavy-handed regulatory response to the bank failures. Alluding to the 2008 banking crash that leveled Lehman Brothers and almost took down other major Wall Street firms, Dimon said:
“Major investment banks, Fannie Mae and Freddie Mac, nearly all savings and loan institutions, off-balance sheet vehicles, AIG and banks around the world — all of them failed. This current banking crisis involves far fewer financial players and fewer issues that need to be resolved.”
Dimon also detailed how JPMorgan is investing in advanced artificial intelligence tools such as ChatGPT. The banking giant uses the technology in processing global payments and is studying how to use it for risk analysis, marketing and fraud analysis, among other uses.
To that end, JPMorgan has assembled a group of more than 900 data scientists specializing in AI and 600 engineers with expertise in machine learning.
“We’re imagining new ways to augment and empower employees with AI through human-centered collaborative tools and workflow, leveraging tools like large language models, including ChatGPT,” Dimon said.
The Associated Press contributed to this report.
