A showdown between Jamie Dimon and Mark Carney has put a spotlight on the titanic struggle between bankers and policy makers over reshaping global financial regulation, highlighting a state of play few would have predicted: With the match almost over, it’s the governments that are winning.
Mr. Dimon, the head of JPMorgan Chase & Co. and a vocal critic of plans to force the world’s biggest banks to retain extra capital, directed a tirade at Mr. Carney, the Governor of the Bank of Canada, during a private gathering in Washington last Friday.
The confrontation occurred in front of a group of about 30 bankers, who assembled at the National Archives to meet with Mr. Carney, a key figure in efforts by the Group of 20 major economies to overhaul an international regulatory regime that was exposed as weak by the financial crisis.
Tensions are high because it is crunch time for the regulatory overhaul that G20 leaders pledged to deliver two years ago at their summit in Pittsburgh. Academic experts have warned ever since that the more time that passes, the harder it will be to muster political enthusiasm for such technical reforms. To some degree, that has happened. But more impressive is the number of jurisdictions that are showing resolve to press ahead. Switzerland, Britain and Australia all are promising to implement rules that exceed the minimum global standard.
Included among the bankers was Bank of Nova Scotia chief executive officer Rick Waugh, who was in the U.S. capital to attend meetings of the Institute of International Finance. Mr. Waugh witnessed his countryman absorb a torrent so aggressive that Goldman Sachs Group Inc. CEO Lloyd Blankfein felt the need to try to smooth things over with Mr. Carney, a former Goldman Sachs investment banker, by e-mail.
A spokesman for the Financial Services Forum, which organized the gathering, declined to comment. Both JPMorgan and Bank of Nova Scotia declined to comment.
The central point of Mr. Dimon’s attack was the G20’s intent to require a few dozen lenders whose failure would threaten the financial system to hold reserves at levels 2.5 percentage points higher than other banks, a measure inspired by the economic destruction caused by the collapse of Lehman Brothers Holdings Inc. in 2008.
JPMorgan, the second biggest U.S. bank after Bank of America, is on the G20’s potential hit list.
“This is the main challenge, that these guys keep pushing, and the regulators weaken,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington. “That would be terrible.”
Mr. Carney stood his ground, countering Mr. Dimon’s critique that the planned measures are “anti-American” and risk hurting economic growth with a similarly passionate defence of the G20’s efforts to construct a regulatory regime that will significantly reduce the risk of another global financial crisis, according to a person familiar with what transpired at the gathering.
On Monday, after The Financial Times published an account of the clash on its front page, Mr. Dimon phoned Mr. Carney to clear the air, according to another person, who is associated with the JPMorgan chief. Mr. Carney returned Mr. Dimon’s call, and the two men had what this person described as a “constructive” conversation about the broad debate over financial regulation.
The Basel Committee of central banks and financial regulators is set to meet Tuesday and Wednesday to finalize its recommendation on a surcharge for the biggest banks, which are commonly referred to as those institutions that are “too big to fail.” G20 finance ministers and central bank governors will meet to consider this and other plans at a meeting in Paris in a few weeks ahead of a summit of leaders in Cannes in November.
