Infotech

JPMorgan could launch its Chase digital bank in France


How do you see the situation in Ukraine?

The situation is obviously very sad. Hopefully there will be a diplomatic solution at some point. The impact on the markets was not as extreme as might have been expected. Oil and gas prices jumped on Thursday, particularly in Europe, but the rise has since tapered off. For the market as a whole, the decline corresponds to a correction in expectations for central bank action.

In which way ?

The market was pricing in a strong probability of a 50 basis point rate hike from the Fed in March. Now, this is in question, because of the consequences of the conflict on global growth and the risk of persistent inflation.

How will sanctions impact JPMorgan?

We are in the process of analyzing them and preparing their application . We will of course apply them and continue our activities as best we can, if possible. But our exposure to Russia is very limited. As an indication, we have 165 employees on site [à Moscou]. Our operations in Russia, where we have operated for 140 years, have had experience with sanctions in the past.

In your opinion, is there a risk of transfer of Russian financial flows to cryptocurrencies?

The volumes traded on cryptoassets are still minimal today, even apart from the current situation in Russia. It is not now that cryptocurrencies will replace euro and dollar flows.

Are you preparing for a cyberattack?

I’m not going to tell you if we’re targeted. By definition, our system is on high alert. We are in contact with government authorities and are extremely cautious. American and European banks have all taken similar measures. But at no time can you tell yourself that you have reached a level of total protection.

“By definition, our system is on high alert” in terms of cyberattacks, says Daniel Pinto.Al Drago/Bloomberg

What is your cyber budget?

We continually invest in our infrastructure, in the order of hundreds of millions of dollars per year. And the minimum level of protection is also constantly reinforced. Our capabilities are very strong. What is at stake when you have an attack is how quickly you can fight back and protect yourself. It’s a constant battle.

What is the place of France for JPMorgan?

France occupies a very important place. Before Brexit, we had 250 employees in France and now we have around 800. Almost half came from London and the other half were hired locally. The integration is going very well. People are happy. Germany and France are the two pillars of our European activities. Most investment banking is in Paris, as is trading. We also have a significant presence in Luxembourg and Ireland and have branches in almost every country.

France occupies a very important place. Before Brexit, we had 250 employees in France and now we have around 800.

How would you rate France as an investment location?

What are the strengths here? You find great talent, great living conditions, a government that has done great work and encourages businesses like ours to grow.

Are there any reforms to encourage?

One sensitive thing is market liquidity, ie the ability to buy and sell bonds or stocks at any time, including in times of stress. This is a critical element, which partially suffered during the coronavirus crisis in the United States or in Europe. The more efficient the market, the better.

Do you plan to launch your Chase digital bank in France?

It is an option. We launched it five months ago in the UK. Clearly the idea was not to found a British-only bank, but to take a first step to learn and then expand to Europe. No decision has been made at this stage but if we get it right, Chase will launch in continental Europe. We have also taken a stake in the Brazilian digital bank C6 and will seek to develop this relationship in the region.

Does that mean that there is still room on the market, despite competition from 100% digital banks?

Sure ! Our competitive advantage is based on exceptional service, the financial strength of our group and the brand. But this is a marathon, not a sprint, so it will take time. We will soon be expanding Chase’s range of services, offering credit cards, mortgages, savings.

European banks are worth very little on the stock market. Could you be tempted by acquisitions?

Several elements oppose it. First, on wholesale banking, we don’t need acquisition. Secondly, for retail banking, our strategy is purely digital, so we are not looking to have branches. Finally, there is a regulatory brake linked to systemic banks, called GSIB in the jargon. The American rules are such that if you buy a bank, the additional capital cost is so high that it destroys any potential value creation linked to synergies. In short, the amount of capital required would be prohibitive. We prefer to conduct surgical acquisitions, in payments or even asset management.

So you’re not going to buy Societe Generale…

No.

If you buy a bank, the additional capital cost is so high that it destroys any potential value creation linked to synergies.

With Brexit, have you noticed a shift from the financial center of London to New York?

Not really. Our business in London has rather strengthened, due to our increased investments in technology and the development of our digital bank. We now have 19,000 employees in the UK and nearly 6,000 in continental Europe, compared to 3,000 before Brexit.

Voices in the banking sector are rising to remove the bonus cap. Is it necessary to put an end to it in Europe?

Bonus capping is not an issue, neither in Europe nor in the UK. The compensation system works differently than in the United States. This simply implies having a higher salary share, which induces higher fixed costs. But frankly, that’s not a topic.

European banks complain of unfair competition from American banks with the implementation of the Basel agreements. Do you understand them?

I don’t see how that could be the case. Every US regulation is gold plated! The rules that apply to large systemic banks (GSIB) or those on capital buffers (SLR) are more biting in the United States than in Europe. I think the Basel rules will have a modest impact because we are already well capitalized.

European bosses complain about the difficulty of recruiting talent. Do you have the same problem?

Given our performance and the strength of our brand, we have no problem recruiting talent. But the labor market is very tight and attrition is higher, all over the world. It’s a challenge, but not only because of rising wages, which is ultimately secondary. The difficulty is that when the teams rotate, you train them and integrate them into the company, which takes time, and then they disappear… We hope it will calm down.

The labor market is very tight and attrition is higher, all over the world. The difficulty is that when the teams rotate, you train them and integrate them into the company, which takes time, and then they disappear…

Is this linked to the phenomenon of “great resignation”?

I do not think so. Even before Covid, there were always people who wanted to change paths… The real problem, in my opinion, is that in the United States, the working population aged under 60 has plummeted with the pandemic . Three or four million Americans have retired. And at the same time, the growth is very strong. In short, there is an imbalance between supply and demand.

You cooperate with Amazon in credit cards. How do you see relations between banks and GAFA in ten or twenty years?

Exactly like today: we will be partners and competitors. I have no doubt: the big tech companies will look for ways to penetrate the financial services market and we will have to rise to the occasion.

But they don’t have the same rules…

Maybe, but if they offer the same services as us, they will have to comply with the same rules.

Should debt funds be regulated like banks?

These players are continually growing and many work with us. Banks have more restrictions, so the same operating conditions should apply to all players. The danger, in reality, is that they overestimate the level of risk. When talking about credit, banks and funds do the same thing, so the billing for the customer should be the same. The constraints will converge over time.

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