(Yahoo!Finance) - JPMorgan Chase (JPM) CEO Jamie Dimon called a new US proposal requiring banks to bolster their capital buffers "hugely disappointing," warning that it could push more lending into private credit markets and have "unintended consequences" for the US economy.
"I would love to know what they really want to accomplish," Dimon said Monday, referring to regulators behind the proposal that was unveiled in July.
This is not the first time Dimon has been critical of the approach taken by regulators, who proposed stronger capital levels to prevent the type of blowups that roiled the industry in March when three sizable lenders failed and depositors pulled their money from institutions across the country.
Dimon, in fact, told analysts in July that nonbank lenders not subject to the same capital rules were already celebrating their competitive advantage by "dancing in the streets."
He repeated some of those arguments Monday during a talk at a Barclays conference in New York. JPMorgan, he said, will need "to hold 30% more capital than a European bank" as a result of the rules, which would take until 2028 to be fully implemented.
Banks affected by the changes proposed in July will see an aggregate 16% increase in their capital requirements. Regulators say the increase would primarily affect the largest banks and that most have enough capital already to comply. Capital is the buffer banks have to hold to absorb future losses.
These changes are part of the US version of an international accord known as Basel III that was developed following the 2008 crisis by the Basel Committee on Banking Supervision.
The goal of that committee — which was convened by the Bank for International Settlements in Basel, Switzerland — was to set global regulatory capital standards so that banks would have enough in reserve to survive crises. The last version of this accord was agreed to in 2017, but plans to roll it out in the US were delayed by the COVID-19 pandemic.
"What was the goddamn point of Basel in the first place?" Dimon said Monday, adding that, "if American banks have to hold 30% more than competitors around the world, that is a huge negative over a long period of time."
When asked if he had spoken with regulators about the capital requirement proposal, Dimon jokingly said he had been "on vacation" and "trying to de-aggravate myself from this kind of thing."
"I want them to do the right thing. It's just clear to me that they didn't," he added.
Dimon also offered some warnings about the direction of the economy.
While the health of US consumers and businesses is still "pretty good," Dimon added: "I'm also quite cautious, in case you didn't get it, about the environment. More cautious than other people. I think there's more potential odds of accident of some sort than other people think."
Banks also face competition to keep their depositors at a time when customers are seeking out higher yields, which means higher funding costs and tighter profit margins.
A key measure of profitability known as net interest income has been eroding at many regional banks.
"Bank deposits are going to come down," he said, and net interest income is "going to come down to a different level. We just don't know when."
Dimon said JPMorgan Chase is maintaining its expectations for full-year net interest income of $87 billion.
JPMorgan's trading business in the third quarter is on pace to be "down 1% or 2%" from the previous quarter and year-ago period while for investment banking "it's something like that."
JPMorgan stands to benefit from a new string of initial public offerings starting this week. Along with Goldman Sachs (GS), it is acting as one of the lead bankers for IPOs from chipmaker ARM and grocery e-commerce company Instacart.
"My advice to a company, if you can go public," Dimon said. "You want to go public, you need to go public. Don't wait too long ... I think the uncertainties out in front of us are still very large and very dangerous."
By David Hollerith · Senior Reporter
