Financial sector tensions caused by the collapse of two banks in the United States last month are still a threat and should be addressed by rethinking the regulatory process, JPMorgan Chase CEO Jamie Dimon said, Reuters reported.

“As I write this letter, the current crisis is far from over, and even if it is behind us, it will have ramifications for years to come,” Dimon said Tuesday in his annual letter to shareholders.

“But the important thing is that recent events are not at all similar to what happened during the global financial crisis of 2008,” he added.

Recent US banking troubles began with the collapse of Silicon Valley Bank, which was shut down by regulators on March 10 as depositors pulled tens of billions of dollars from the bank.

The smaller Signature Bank closed two days later.

And in Europe, Swiss regulators acted as an intermediary in the acquisition of Credit Suisse by UBS.

JPMorgan and other big banks stepped in to make $30 billion in deposits with First Republic, another regional bank that investors feared could become the next SVB.

The strain at regional banks has led investors and analysts to speculate that “too big to fail” institutions will benefit from the crisis, but Dimon said JPMorgan wants to strengthen smaller banks for the benefit of the entire financial system.

“Any crisis that hurts Americans’ confidence in their banks hurts all banks, a fact that was known even before this crisis. While it is true that this banking crisis benefited the larger banks because of the influx of deposits they received from smaller institutions, the idea that this crisis was somehow beneficial to them is absurd,” Dimon wrote.

REGULATORY CHANGES

Dimon also warned against drastic changes in the regulatory system. Most of the risks, including potential losses from held-to-maturity bonds, were “hiding in plain sight,” he wrote.

According to him, the unknown variable was the interconnected network of the SVB warehouse base.

“The recent bankruptcies of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, and the associated stress in the banking system, highlight that simply complying with regulatory requirements is not enough.

There are many risks, and managing these risks requires constant and vigilant monitoring as the world evolves,” Dimon wrote.

Instead, JPMorgan’s CEO called for more advanced regulation. He noted that held-to-maturity bonds, which have become a problem for many banks, are actually high-rated government debt that performs well under current rules, and that recent stress tests have not shown interest rates rising quickly.

“This is not done to fire the management of the bank, but only to make it clear that it was not the best time for many players. All of these confounding factors became extremely important when the market, rating agencies and investors focused on them,” Dimon wrote.

He said regulations should be “less academic, more collaborative” and that policymakers should be more cautious about providing some financial services to non-banks and so-called shadow banks.

CLIMATE AND ARTIFICIAL INTELLIGENCE

In addition to JPMorgan’s financial results, Dimon touched on two other main topics: the need for investment in climate technology and sustainability programs, and the development of artificial intelligence.

Dimon said more urgency is needed to accelerate the development of clean technologies at many different levels, singling out permitting reform and the lead field as two areas for consideration.

“To accelerate progress, governments, businesses and non-governmental organizations must agree on a series of practical policy changes that comprehensively address the fundamental problems holding us back,” Dimon wrote.

On AI, which has come to the fore among investors since the launch of OpenAI ChatGPT in November, Dimon said JPMorgan already has hundreds of AI use cases in manufacturing, but stressed the importance of caution with the technology.

“We take the responsible use of AI very seriously and have a multidisciplinary team of ethics professionals who help us prevent unintentional abuses, anticipate regulations, and build trust with our clients, customers and communities,” the CEO wrote.

The shareholder letter comes after a difficult year for markets, with major US stock indexes headed for a “bear market” in 2022.

Dimon called this a difficult year around the world, citing the war in Ukraine and rising geopolitical tensions with China. However, the CEO said 2022 was “somewhat unexpectedly” good for JPMorgan.

The bank’s shares fell 15% for the calendar year, but it posted a net profit of more than $37 billion.