Apollo and Blackstone specific satisfaction over extra stringent financial institution rules

Jamie Dimon, CEO of JPMorgan Chase, testifies through the Senate Banking, Housing, and City Affairs Committee listening to titled Annual Oversight of the Nations Largest Banks, in Hart Constructing on Sept. 22, 2022.

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JPMorgan Chase executives warned Friday that harder rules within the wake of a trio of financial institution failures this yr would elevate prices for customers and companies, whereas forcing lenders to exit some companies solely.

When requested by Wells Fargo analyst Mike Mayo concerning the affect of modifications proposed by Federal Reserve Vice Chair for Supervision Michael Barr in a speech earlier this week, JPMorgan CEO Jamie Dimon mentioned that different monetary gamers might find yourself winners.

“That is nice information for hedge funds, non-public fairness, non-public credit score, Apollo, Blackstone,” Dimon mentioned, naming two of the biggest non-public fairness gamers. “They’re dancing within the streets.”

Blackstone and Apollo didn’t instantly reply to requests for touch upon Dimon’s remarks.

Banks face necessities to carry extra capital as a cushion in opposition to dangerous actions from each U.S. and worldwide regulators. Authorities are proposing greater capital necessities for banks with a minimum of $100 billion in belongings after the sudden collapse of Silicon Valley Financial institution in March. However that additionally coincides with a long-awaited set of worldwide guidelines spurred by the 2008 monetary disaster known as the Basel III endgame.

Rise of the shadow banks

“How a lot enterprise leaves JPMorgan or the trade if capital ratios go up as a lot as probably proposed?” Mayo requested.

CFO Jeremy Barnum mentioned that banks would elevate costs on finish customers of loans and different merchandise earlier than finally deciding to depart some areas solely.

“To the extent we have now pricing energy and the upper capital necessities implies that we’re not producing the best return for shareholders, we’ll attempt to reprice and see how that sticks,” Barnum mentioned.

“If the repricing isn’t profitable, then in some instances, we must remix and which means getting out of sure services,” he mentioned. “That in all probability implies that these services go away the regulated perimeter and go elsewhere.”

After the 2008 monetary disaster, heightened guidelines pressured banks to drag again from actions together with mortgages and pupil loans. For firms and institutional gamers, acquisitions and different big loans are actually more and more funded by non-public fairness gamers like Blackstone and Apollo.

That has contributed to the rise of non-bank gamers, typically known as the “shadow banking” trade, which has involved some monetary specialists as a result of they typically face decrease federal scrutiny than banks.

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