JPMorgan’s CEO says banking crisis still on

In a 43-page letter to shareholders on Tuesday, JPMorgan Chase & Co CEO Jamie Dimon warned that the U.S. banking crisis will continue to be felt for years to come. Despite progress made in the economy since the 2008 financial crisis, storm clouds are still threatening. This current crisis, which includes fewer financial players, has not yet peaked and has increased the likelihood of a recession. The recent failure of Silicon Valley Bank and Credit Suisse’s rescue by UBS have added to the stress on the banking system.

Dimon believes that the risks that led to this crisis were “hiding in plain sight,” including the interest rate exposure and level of uninsured deposits at Silicon Valley Bank. However, he downplayed similarities to the global financial crisis, as this crisis involves far fewer players and issues to be resolved. While the banking crisis has provoked market jitters and tighter financial conditions, Dimon is unsure whether it will slow consumer spending, which drives the U.S. economy.

JPMorgan and other large lenders recently committed to providing a $30 billion lifeline for First Republic Bank, playing a central role in resolving the current crisis. Dimon called for thoughtful regulations in response to the turmoil, including clearer rules for dealing with failed banks. He criticized erratic stress test capital requirements and the constant uncertainty around future regulations, which he believes damage the banking system without making it safer.

Dimon also expressed concern about nonbank financial firms, which are becoming increasingly competitive with banks in providing mortgages, credit cards, and market-making services. He questioned whether these institutions would be able to provide credit when their clients need them the most, as he personally doubts that many of them could. JPMorgan’s shares fell 2% to $127.55 shortly after midday.