JPMorgan steps up criticism of U.S. bank capital rule overhaul

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JPMorgan criticism of bank rules

Highlights

JPMorgan CEO Jamie Dimon criticizes proposed U.S. bank capital rule revisions, arguing they would unfairly raise JPMorgan's capital requirements by 4% while reducing competitors' by 4.8%.
Fed Vice Chair Michelle Bowman targets year-end completion for new capital rules, including Basel risk weights and GSIB surcharge adjustments, with the latest March draft viewed as more industry-friendly than 2023 proposals.
JPMorgan posts record Q2 profit, citing rebounds in large IPOs, stronger dealmaking, and elevated trading revenue amid continued regulatory disputes over capital calculation methodologies.

Regulatory dispute over capital calculations

As reported by Reuters, Dimon said during JPMorgan's quarterly earnings call on Tuesday that regulators should not calculate capital requirements in a way that produces a falsely higher number. He said officials should directly require more capital if that is their policy goal, rather than adjust the methodology in what he described as an unfair manner.

Dimon argues that the proposals for how lenders measure funds set aside for potential losses disproportionately affect JPMorgan and other large diversified banks, while benefiting Wall Street firms with different business models. The comments deepen a widening split between the country's largest bank and regulators, even though the latest draft is broadly viewed as more favorable to the industry than the original 2023 version.

JPMorgan has previously said the new drafts would raise its capital requirement by about 4%, while competitors would see an average 4.8% reduction. A spokesperson for the Federal Reserve, which is leading the effort with two other federal bank regulators, does not respond to a request for comment.

Industry impact and rulemaking timeline

The agencies are working to finalize several capital measures, including Basel rules on risk weights and the GSIB surcharge, an extra capital layer for the nation's largest and most systemically important banks. Banks and other interested parties have filed comment letters that raise concerns including what lenders describe as double-counting of some risks and a new capital charge on unused credit lines.

Fed Vice Chair for Supervision Michelle Bowman says she hopes to complete the rule-writing effort by the end of this year. The proposals, unveiled in March, are more industry-friendly than a 2023 draft advanced by Democratic regulators, which loses momentum amid industry opposition and the transition to President Trump's administration.

Dimon again calls on the Fed to revise the GSIB surcharge formula so it fully reflects economic growth since the central bank imposed it in 2015, a change that would reduce lenders' measured footprint in the economy and lower the resulting charge on paper. The Fed also proposes reducing the effect of banks' reliance on short-term wholesale funding in the surcharge calculation, a shift likely to help Goldman Sachs and Morgan Stanley more than deposit-rich rivals.

On the same earnings call, JPMorgan Chief Financial Officer Jeremy Barnum says he does not understand why regulators would want an outcome that is disproportionately damaging to banks' ability to serve Main Street. JPMorgan reports record second-quarter profit on Tuesday, helped by a rebound in large IPOs, stronger dealmaking and elevated trading revenue in volatile markets.

In our earlier coverage of major Wall Street banks’ second-quarter earnings, we outlined how a rebound in investment banking and resilient trading revenue supported profit and fee growth across the sector. We also noted that, despite the upbeat results, executives flagged risks such as elevated valuations, high leverage and geopolitical tensions that could still unsettle markets and business activity.

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