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Dimon says problems like the repo lending crunch could happen 'increasingly if we're not careful'

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Key Points
  • J.P. Morgan Chase CEO Jamie Dimon warned that more issues could happen in the overnight repo markets without longer-term solutions.
  • Very short-term rates spike in mid-September amid a crunch in dollar funding.
  • "I think you're going to see issues like this happen increasingly if we're not careful because of certain constraints that were put in place," Dimon told CNBC.
Jamie Dimon, CEO of JP Morgan Chase, speaking at the Business Roundtable CEO Innovation Summit in Washington, D.C. on Dec. 6th, 2018. 
Janvhi Bhojwani | CNBC

The kinds of problems that sent short-term lending rates soaring in mid-September could happen more often if permanent fixes aren't found, J.P. Morgan Chase CEO Jamie Dimon said Tuesday.

Dollar funding constraints caused rates to spike in the repo markets, where banks get overnight funding for their operations. The Federal Reserve brought the issues under control through a series of ongoing market operations, but Dimon warned that the central bank's fixes may not be enough.

"I think you're going to see issues like this happen increasingly if we're not careful because of certain constraints that were put in place," the head of the largest bank in the U.S. by assets told CNBC's Wilfred Frost in a "Squawk on the Street" interview.

During the company's third-quarter earnings call, Dimon also noted problems with regulations that kept banks from helping out during the funding crunch. 

Fed Chairman Jerome Powell and others have wondered why banks with excess liquidity didn't step in to help during the repo problems. He said last week that he does not foresee the Fed relaxing capital requirements in response to the issue.

"They're aware of the issues," Dimon said of the Fed. "I think there should be more permanent fixes, not just temporary fixes. but let them work on it a little bit."

Dimon did not expressly call for a change in the rules, which have been increased dramatically since the liquidity crunch that led to the 2008 financial crisis.

"I think it's important for the American public: This is not about what's good for an American bank. So it's not about regulation, it's about proper function of markets," he said. "We're fine either way."

Dimon is not the only one to warn about future recurrences of repo problems. Bank of America Merrill Lynch, Goldman Sachs and others have said more issues could occur, particularly as the year draws to a close and banks have to make sure they meet international capital requirements.