JPMorgan's Dimon slams 'false' capital rules amid record Q2 profit
JPMorgan's chief executive attacked proposed US capital rules on Tuesday, warning the regulations unfairly burden his bank relative to competitors just as the lender posted record second-quarter earnings driven by a dealmaking revival.
JPMorgan Chase CEO Jamie Dimon intensified his criticism of US bank regulators on Tuesday, arguing that proposed capital requirements are calculated in a "false" way to artificially inflate the buffers his bank must hold. The comments came as the lender reported record second-quarter profit, driven by trading operations that leveraged market volatility and a resurgence in large IPOs and dealmaking that propelled investment banking fees to peaks not seen since 2021.
At the core of Dimon's argument is a stark disparity in how the new drafts impact balance sheets across the sector. JPMorgan estimates the current proposals would force it to increase its capital by roughly 4%, while competitors would conversely see an average capital reduction of 4.8%. For investors, this asymmetry is significant because holding excess capital directly constrains a bank's return on equity and limits its ability to deploy funds.
"They should not do the numbers in a false way to make the number higher," said Dimon. "The number should be the number. If they think we should have more capital, they should ask us... I'm not happy to have these numbers falsely done." He specifically took aim at the Global Systemically Important Bank surcharge, an added capital layer for the nation's largest lenders. Dimon urged the Federal Reserve to adjust the surcharge's calculation to reflect US economic growth since its 2015 implementation, a move that would shrink the bank's theoretical footprint and lower the charge.
The Federal Reserve is leading the rule-writing effort alongside two other federal agencies, though a Fed spokesperson declined to comment. Fed Vice Chair for Supervision Michelle Bowman has indicated she aims to finalize the rules by the end of this year. The March proposals, covering Basel risk weights and the GSIB surcharge, are broadly considered more industry-friendly than a controversial 2023 draft that stalled amid industry opposition and a change in presidential administrations.
However, the current framework continues to draw heavy fire from Wall Street. Formal comment letters from the industry have flagged structural issues, including what banks view as the double-counting of certain risks and a controversial new capital charge on unused credit lines. How regulators resolve these specific calculations will dictate the capital efficiency of major US lenders for years to come.
