Dimon, Bank CEOs: We Need to Pause New Regs

By McKendry, Ian | American Banker, October 11, 2016 | Go to article overview

Dimon, Bank CEOs: We Need to Pause New Regs


McKendry, Ian, American Banker


Byline: Ian McKendry

WASHINGTON -- The regulations added in the wake of the financial crisis have made the system safer, but it's time to pause on new rules and find ways to improve what's been put in place already, according to the top executives at some of the largest banks.

Speaking at a conference Friday, they argued that the global economy is moving at a snail's pace, blaming financial regulation at least in part for the fact that U.S. GDP grew less than 2% in the first half of the year.

"It is clear...that Japan, China, Europe kind of want to stop, digest, not add to capital, liquidity" requirements, they "want to modify some things to make sure it is helping the economy and the United States still wants to push for more here," said Jamie Dimon, the chief executive officer at JPMorgan Chase during a panel discussion at an Institute of International Institute Finance conference.

Speaking alongside Dimon, Morgan Stanley CEO James Gorman said "what I would like to see [is] more international harmony and let's stop and pause and digest and let's just see what we got for a minute."

"We have more belts and suspenders and that is probably a good thing for building that confidence in the financially system, but the lack of harmony around the jurisdictions around the world is sort of the next phase of the problem," said Gorman.

Dimon pointed to an old rule of thumb that money would multiply five times as it went from a deposit and was lent out to finance the production of goods and services. He said the rate at which money is multiplied now is much lower "because of all these new requirements." He pointed to $2.5 trillion in excess reserves held by banks in the Federal Reserve System.

"I don't think the system is functioning the same. Nor do I think the system is coordinated," said Dimon, who estimated that rules and regulations have slowed U.S. economic growth to 2% instead of potentially 3.5%

Negative Interest Rates

Several CEOs are concerned about the possibility of negative interest rates, which has already happened in parts of Europe and Asia. Fears are mounting that negative rates could become more prevalent, which would present a significant problem for the bank business model. …

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