The head of JPMorgan warned of a new financial crisis due to real estate
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The bankruptcy of a number of regional banks in March of this year was not the last crisis in the market. CEO of JPMorgan Chase, Jamie Dimon, warned that commercial real estate loans could be the next shock for the American banking system, writes CNBC.
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Side effect
“There is always a downside. In this case, the side effect will probably be real estate. These will be certain places, certain office facilities, certain construction loans. These are very specific cases,” Dimon said.
According to the agency’s information, the last few years in American banks have seen minimal levels of non-repayment of loans. This happened against the background of low interest rates and additional pandemic incentives.
But now the picture is changing. Inflation is high, and the US Fed intends to further tighten its monetary policy by raising interest rates. Commercial real estate in some regions may suffer, as preference is given to working at home and refusing to return to the office, reports CNBC.
Dimon also added that defaults on credit cards can reach 6-7% in the event of a spike in unemployment. Although, even if it happens, it is still less than what was observed in the crisis year of 2008, when defaults reached 10%. He further mentions that regional banks need to be prepared for the fact that interest rates may rise more than most market players expect.
“I think that everyone should be prepared for the fact that rates will continue to rise, up to 6-7%,” added the head of JPMorgan.
Fed rate
In May, the US Fed raised the interest rate by 25 bps. — up to 5-5.25% per annum, which was the tenth rate increase in this cycle of monetary policy tightening. In total, since March 2022, the rate has increased by 500 bps. Before that, for two years, it was at a near-zero level.
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Editor of the news feed Yaroslav Holoborodko Writes on the topics: Macroeconomics, stock market, cryptocurrency
Source: Ministry of Finance
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