J.P. Morgan Chase & Co. Chief Executive James Dimon wants us to know that market volatility is likely here to stay. Despite that volatility he believes his own firm is becoming stronger and safer.
During his annual shareholder letter, released on Wednesday, Dimon said liquidity in many major markets has gotten worse, leading to “extreme volatility and distortions.”
“The good news is that the system is resilient enough to handle the volatility,” he wrote. “The bad news is that we don’t completely understand why this is happening.”
Dimon also boasted that JP Morgan’s traders lost money on fewer than 20 days over the past three years.
Dimon believes many of the legal and regulatory issues the banking industry have faced are starting to dissipate which should help strengthen their underlying businesses.
Dimon remains critical of the government’s stress tests, which he said measured scenarios that went beyond any recent crisis.
Dimon pointed specifically to the 2015 Comprehensive Capital Analysis and Review, or CCAR, which projected much higher credit losses than all the banks during the Great Recession.
“We manage our company so that even under the worst market stress test conditions, we would almost never bear a loss of more than $5 billion,” he wrote in his letter to investors.
Dimon also warned that large banks serve a necessary purpose in our system and warned that they “cannot be utilities” despite discussions of that possibility.
He said utilities are monopolies where one company operates in a market and prices and returns are regulated. But banks have to be able to turn customers down for the purpose of responsible lending.