Financial turmoil will be felt for years, says JP Morgan boss

theguardian.com:

The financial turmoil that led to the downfall of Silicon Valley Bank in the US and Credit Suisse in Europe is not yet over and its effects will be felt for years, the boss of America’s biggest bank has warned.

In an annual letter to JP Morgan’s shareholders, Jamie Dimon said last month’s failure of SVB and the Swiss government-brokered takeover of Credit Suisse by its rival UBS had undermined confidence in the banking system.

“As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come,” he said.

Although suggesting that there were marked differences with the 2008 financial crisis, Dimon, who has been the chair and chief executive of JP Morgan since 2006, suggested that the risks to the market had been “hiding in plain sight”, in a swipe at regulators.

These risks included exposure to interest rates being raised sharply around the world to tackle soaring inflation. Dimon criticised the US Federal Reserve for failing to incorporate higher borrowing costs into its annual stress tests.

The turmoil in the banking sector had led investors to price in a greater risk of a US recession, Dimon said, warning that banks were now more likely to show caution when approving new lending for businesses and households, with consequences for an economy already struggling with rate increases.

“It is not clear when this current crisis will end,” Dimon said. “It has provoked lots of jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative.”

SVB last month became the largest bank to fail since the 2008 crisis after it was unable to raise emergency funding to plug a multibillion-dollar