The banking crisis will have consequences “over several years”, says the boss of JPMorgan Chase

Within days, the sector experienced the failure of three institutions in the United States, including two of the three largest bank failures in history. (Photo: 123RF)

New York — The crisis that the banking sector has experienced for a month is “not over” and will have consequences “for several years”, warned the CEO of JPMorgan Chase, Jamie Dimon, in a letter addressed to the shareholders published Tuesday.

“The current crisis is not over, and even when it is behind us, it will have repercussions for several years”, wrote the emblematic boss of the first American bank by the size of the assets, in a document appearing in the Annual Report.

Within days, the sector experienced the failure of three institutions in the United States, including two of the three largest bank failures in American history. The sequence continued with the takeover, in disaster, of Credit Suisse by its Swiss competitor UBS to avoid the implosion of this major European player.

“While it is true that this banking crisis has + benefited + the largest banks, which have received an influx of deposits from smaller institutions, the idea that this collapse has been good for anyone is absurd” , argued Jamie Dimon.

In the week that saw Silicon Valley Bank (SVB) and Signature Bank go out of business, smaller banks saw their deposits shrink by US$185 billion, while big names in the marketplace surged 120 billion, according to figures published by the American central bank (Fed).

“These bankruptcies have not been good for any bank, regardless of its size,” hammered the CEO. “Any crisis that affects Americans’ confidence in their banks is bad for all institutions.”

“And even if it has nothing to do with 2008, it is not easy to determine when this crisis will end,” wrote Jamie Dimon, who expects it “to cause a tightening of conditions financial, as banks and other lenders will become more cautious.”

While he expects the banking crisis to lead to changes in regulation, he urges authorities to avoid “a knee-jerk, drawn-out or politically motivated response”.

“We shouldn’t try to set up a diet [réglementaire] that eliminates the possibility of bankruptcy,” he says, “but rather a system that reduces the likelihood of default and contagion.”