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January 23, 2013 12:49 pm
Unbowed after a year in which severe problems of risk management at JPMorgan were revealed, Mr Dimon rebuffed criticism from Paul Singer, head of Elliott Capital Management, that banks made “completely opaque” disclosures.
Mr Singer said the unfathomable nature of banks’ public accounts made it impossible to know which were “actually risky or sound”.
Mr Dimon said JPMorgan’s accounts were clear, adding: “With all due respect hedge funds are pretty opaque too.”
However, Mr Singer’s points have become a common criticism among both hedge fund and institutional investors and they add to pressure on banks to disclose better quality information about their balance sheets.
Mr Singer noted that derivatives positions, in particular, were difficult for outside investors to parse and worried that banks did not always collateralise their positions. Mr Dimon said the bank did for all “major” clients. Mr Singer retorted: “Well, we’re a minor client then.”
Whether banks are “investable” or not is a regulatory as well as due diligence issue, according to Tidjane Thiam, chief executive of Prudential, the UK insurer. He said new Solvency II regulations on the insurance industry effectively prohibited insurers from investing in banks.
“Who’s going to provide capital to banks?” Mr Thiam asked, blaming a “lack of joined-up thinking” among regulators.
During the panel Mr Dimon returned to familiar territory by also discussing regulation, his assertiveness apparently undiminished only seven months after JPMorgan was found to have racked up multibillion-dollar losses on complex credit derivatives trades.
He noted that “in the United States we’ve created more regulators, not less” and argued they were trying “to do too much, too fast”.
He complained that this led to increased bureaucracy: “In the United States five years [after the crisis] we don’t have mortgage rules yet.”
Regulations mandated by the 2010 Dodd-Frank Act, which overhauled US financial rules, are yet to be finalised by regulators.
In general, the regulatory debate is not as pointed as in previous years at Davos, partly because most of the international rules have now been decided.
But with Mr Dimon among the panellists urging restraint from regulators, Zhu Min, deputy head of the International Monetary Fund, said it would be a “huge mistake” to row back on reforms such as the Basel III regulations on higher capital and liquidity standards.
“Financial markets structures haven’t changed much,” Mr Zhu added. “We’re not safer yet.”
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