JPMorgan CEO of consumer & community banking, Marianne Lake, is at the top of a very, very short list to potentially replace Jamie Dimon as CEO of JPMorgan Chase & Co. when he retires, whenever that may be.
So when she spoke at today’s Goldman Sachs Financial Services Conference, many members of the audience of 300 or so people took out their computers or note pads and started taking notes, trying to gauge what one of the possible future leaders of the largest bank in America had to say about the future of the industry.
When Lake started expressing concerns about pending regulation and legislation, many in the audience started scribbling furiously.
“The things that would worry me the most are the things where the playing field isn’t even as a result of regulation or legislation,” she said. “Effectively, winners and losers are being picked.”
“We’re willing to compete,” she added. “But things like the Credit Card Competition Act for different reasons, 1033, or Regulation ii, those things worry me. Not only in principle and for a whole bunch of reasons that we can debate, they also worry me because they are making the playing field un-level, in favor of three-party networks or merchants and against customers.”
Lake’s first concern, the Credit Card Competition Act of 2023, was introduced by the Democratic Senator from Illinois, Richard Durbin, forcing credit card issuers to accept transactions from one of the two main payment networks (Visa and Mastercard) and at least one other alternative network.
Though debit card fees have been capped since the so-called Durbin Amendment to the Dodd-Frank Act was passed in the aftermath of the Great Recession, the 2023 act further reduces the fees and aims to increase competition by forcing issuers to process at least two payment networks.
Chase argues that reducing credit fees makes it more difficult for people with lower credit card scores to borrow money.
Her second concern lay with Regulation II, which covers debit card interchange fees—paid by a merchant’s bank to the customer’s bank—that was proposed on October 2023 by the Federal Reserve Board. Essentially, the rule lowers the maximum interchange fee on a $50 debit card transaction from about 24.5 cents to 17.7 cents.
Chase has been fighting the proposal in various forms for more than a decade, going back at least to a comment letter from Lake’s predecessor, Ryan McInerney (now the CEO of Visa), in which he called the proposal “fundamentally flawed,” and argued reducing fees merchants can charge will leave consumers on the hook for any shortfall.
The last regulatory concern Lake alluded to was Section 1033 of the Consumer Financial Protection Act of 2010. Though the section wasn’t initially implemented, the Consumer Financial Protection Bureau this fall released a final rule requiring that data providers fulfill its terms by making data about many financial products and services available to consumers and authorized third parties.
The so-called Open Banking Rule has been hotly contested by banks, which see it as a way to artificially tilt competitive dynamics in favor of fintechs and other lightly regulated firms.
Overall, though, Lake sounded optimistic in her address, including when it came to her appraisal of the future of the regulations, and of regulatory agencies generally speaking. In addition to a reversal of JPMorgan’s Net Interest Income guidance, which she announced is expected to beat expectations by $2 billion this year, she expects the incoming regulatory regime to be bank-friendly.
“From a regulatory perspective,” she said, “we’re all expecting there will be some immediate leadership changes at several, if not many, or all of the agencies, that will have an impact on the path of regulation for financial institutions, which I think would be net positive.”
This article was updated to note that the Durbin Amendment applies to debit cards.
