JP Morgan Chase’s chief executive has said that many banking products and forms of lending are moving out of the banking system to non-banks.
In a letter to shareholders, Jamie Dimon, chairman and chief executive of the American investment bank and financial services holding company, said that the regulatory differences between banks and non-banks could contribute to a shift in the lending space.
He said that more banking products and other forms of lending are being moved into the non-bank space, which could be partly attributed to banks facing heavier rules and regulations than non-banks.
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“It is completely clear that, increasingly, many banking products, such as payments and certain forms of deposits among others, are moving out of the banking system,” Dimon said in the letter.
“In addition, lending in many forms – including mortgage, student, leveraged, consumer and non-credit card consumer – is moving out of the banking system. Neo-banks and non-banks are gaining share in consumer accounts, which effectively hold cash-like deposits.”
He added that payments are also moving out of the banking system, and said that “many of these new competitors have done a terrific job in easing customers’ pain points and making digital platforms extremely simple to use.”
“But growth in shadow banking has also partially been made possible because rules and regulations imposed upon banks are not necessarily imposed upon these non-banks,” Dimon wrote.
“While some of this may have been deliberate, sometimes the rules were accidentally calibrated to move risk in an unintended way. We should remember that the quantum of risk may not have changed – it just got moved to a less-regulated environment.
“And new risks get created. While it is not clear that the rise in non-banks and shadow banking has reached the point of systemic risk, this trend is accelerating and needs to be assiduously monitored, which we do regularly as part of our own business.”