Jamie Dimon on the Unfinished Banking Crisis and Regulatory Blind Spots

Bailing out uninsured depositors signals implicit guarantees that distort future risk-taking.

Janet Yellen’s full backstop of SVB and Signature uninsured accounts protected wealthy tech investors rather than letting the resolution process impose haircuts.

Why: Moral hazard expands when stakeholders believe losses will be socialized.

"Janet Yellen... rushed to the rescue of careless tech investors whose wealth had ballooned due to low interest rates"

Rules written to prevent the last crisis often seed the next one.

Post-2008 capital and liquidity rules pushed banks into large portfolios of treasury bonds because they carried zero risk-weight and were deemed highly liquid, yet rising rates vaporized their market value.

Why: Regulators optimized for credit risk (the 2008 villain) while ignoring duration risk, creating a blind spot that Silicon Valley Bank exploited.

"the regulations ushered in after the credit crunch encouraged banks to build large portfolios of treasury bonds that then fell in value when the Federal Reserve raised interest rates"

Complex, Fed-mandated stress tests can lull risk committees into false confidence.

The annual CCAR exercise became a compliance ritual that never modeled sharply higher interest rates, leaving banks unprepared for the fastest hiking cycle in decades.

Why: Scenarios anchored to the last recession missed a macro variable that had not bitten since 1994.

"the exercise has become an enormous mind numbingly complex task about crossing T's and dotting I's that might give a risk committee a false sense of security"

Discretionary oversight atrophies when supervisors rely solely on rule-based checklists.

Contemporary examiners focus on process and procedure, rarely challenging business-model risk choices that fall between regulatory cracks.

Why: Human judgment was replaced by box-ticking, allowing obvious interest-rate mismatches to hide in plain sight.

"supervisors just focus on process and procedures today and are reluctant to make judgments about the actual decisions being made by banks"

Zero risk-weights can disguise large economic risks.

Treasury securities carried a 0 % risk-weight under Basel III, letting SVB accumulate massive duration exposure without holding incremental equity.

Why: Risk-weighting is a proxy, not a truth; when the proxy is wrong, capital buffers vanish.

"under the risk-weighted capital rules, treasury securities are risk-weighted to zero, meaning that a bank has to hold zero equity against their treasury positions"

Raising the ‘systemically important’ asset threshold shifts risk into the shadows.

Lobbying pushed the Dodd-Frank threshold from $50 B to $250 B, exempting SVB and Signature from stress tests and tighter liquidity rules.

Why: Concentrated, undiversified deposit bases at mid-size banks became invisible to macro-prudential radar.

"US regulators in 2018 raised the threshold for a financial institution to be considered systemically important to $250 billion"

Uninsured deposits are flightier in a world of instant mobile transfers.

SVB’s $8 T of uninsured deposits—swollen by a decade of QE—evaporated in hours via banking apps, outpacing the Fed’s daylight liquidity windows.

Why: Technology compresses the timeline of classic bank runs from days to minutes.

"the Federal Reserve is not set up to deal with the speed of online consumer behavior"

Rapid rate hikes expose hidden leverage across borrowers and lenders.

Higher refinancing costs will hit commercial real estate and other leveraged sectors, revealing additional balance-sheet fragilities.

Why: Asset values were priced for perpetually low discount rates; repricing is painful and protracted.

"higher interest rates can be expected to result in pain for any borrowers who have to refinance their loans, which... could expose additional weaknesses in the US economy, including in the real estate market"