In their efforts to shore up banks and avoid another financial meltdown, regulators should be careful not to drive too much risk into the shadow banking sector, Jamie Dimon, JPMorgan Chase's chairman and chief executive, said Friday.
New requirements imposed on large banks have made progress in dealing with the problem of too-big-to-fail, Dimon said during the Institute of International Finance's annual meeting in Washington. A new concern is whether the associated risks are simply being shifted from one place to another, he said.
"I wouldn't call it shadow banking, I would call it nonbank financials," Dimon said. "Do you want to move the payments system out of banking? Do you want to move the deposit system out of banking? You don't want to put so much risk into the nonbank financial system that it blows up and poses a risk."
Dimon's comments were his first public statements since JPMorgan's second-quarter earnings conference call in July. Dimon has been working on a reduced schedule since this summer, when he disclosed that he had been diagnosed with throat cancer.
He and the other panelists Brian Moynihan, Bank of America's chairman and CEO; James Gorman, chairman and CEO of Morgan Stanley; and Anshu Jain, co-CEO of Deutsche Bank were questioned on a range of topics. A large portion of the discussion dealt with technology and how it's disrupting the banking industry. Dimon said Silicon Valley companies will use big data in competing with banks in financial services, but banks will use big data, too.
"There is a lot of nontraditional data that will be good for underwriting," Dimon said. "It's not like we're sitting still."
On the state of world economies, Dimon said he does not expect China to have a "hard landing."
"They're very knowledgeable, very bright and have the ability to move very quickly," he said.
On a question about the Federal Reserve's plan to stop its bond purchases this year, and perhaps raise interest rates next year, Moynihan said that it could be a good situation for Bank of America.
"The key is, if [rates are] rising for the right reasons, that the economy is growing, that's good for all of us," Moynihan said.
Dimon also delivered some of his trademark one-liners. In one exchange about Bitcoin, Dimon said, "regulators aren't going to like it because they can't control it."
Another exchange dealt with Dimon's political aspirations or lack thereof. Tim Adams, the institute's president and CEO, asked the panelists for their outlook on the U.S. economy. Moynihan responded that while consumers are spending and middle-market and small business borrowers are doing well, unemployment and a lack of wage growth are weighing down the economy.
Dimon's response had a much more populist theme.
"America has been chugging along for years. Corporate clients are in fabulous shape. Consumers' debt-income ratios are back to what they were in 1985," Dimon said. "There are a lot of scars on people who got hurt in the global recession. Middle-income households have been losing income. Until we're doing better for everyone, you'll have this sour attitude and this hostility toward banks."
"You sound like a great candidate for 2016," Adams said. "Can we launch your candidacy today?"
"No," Dimon replied.