JPMorganChase CEO Dimon warns of flawed Basel proposal

• Key insight: Jamie Dimon called elements of regulators’ latest Basel proposal “nonsensical,” arguing the framework unfairly penalizes scale. 
• What’s at stake: The revised plan would lower JPMorganChase’s G-SIB surcharge to about 5%, but still force significantly higher capital levels compared to smaller competitors. 
• Forward look: Dimon signaled pushback from the bank in upcoming comment letters to bank regulators. 

WASHINGTON — JPMorganChase CEO Jamie Dimon said in his annual shareholder letter that some parts of regulators’ recent Basel proposal are “frankly nonsensical.” 

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While bank regulators’ recent Basel III proposal offers relief for big banks compared to an earlier version under the Biden administration, the new surcharge pitch for global systemically important banks, or G-SIB, is still too pricey for the country’s largest institution, Dimon said. 

Under the new proposal, JPMorgan’s surcharge would drop to about 5%, which Dimon said would mean that the bank would have to hold as much as 50% more capital across most of its loans to U.S. consumers and businesses compared to non-too-big-to-fail banks. 

“While we can accept that some level of surcharge is appropriate, given our position in the market, the proposed level just seems to punish our success, our strength, our consistency and our balanced business model,” Dimon said. “Frankly, it’s not right, and it’s un-American.” 

Dimon also took issue with the operational risk framework in the proposal, although that, too, has been eased since the 2023 Biden-era rule. 

“Since the current proposal still retains this operational risk and hasn’t addressed all the duplication and flaws, we could show you some additional capital metrics that are a fairer representation of the strength of our balance sheet,” Dimon said. 

The Basel project for regulators is now an extended one, and with the long-awaited Trump-era proposal drawing increased scrutiny from banks such as JPMorgan, it’s likely to linger even longer before being finalized. Dimon said that these concerns would be forthcoming from the bank in a comment letter to regulators. 

“Everyone wants to move on, and there are new important areas that require focus, like liquidity regulation,” he said. “But, unfortunately, the latest proposals are still very flawed in a few specific areas, so we will be pointing that out in our comment letters.” 

Dimon addressed a range of other concerns in his 48-page letter to shareholders, and outlined a broad set of policy initiatives that align the strength of the bank with the fate of the country. Dimon, 70, has long expressed an interest in the policy coming out of Washington, even outside of issues that affect his institution or the banking world directly.  

He listed private credit as a chief concern, although he said that troubles in that area are not currently systemic, and wrote that with the ongoing war in Ukraine and the military actions in Iran, the U.S. needs to grow its military and economic strength. 

“With the right policies and committed actions, the United States will maintain the strongest military and strongest economy and will remain the bastion of freedom and the arsenal of democracy,” Dimon said. “In spite of all our extraordinary blessings, the United States needs to get stronger and tougher to make this true — no country has a divine right to success.”