JPMorgan CEO Jamie Dimon warns private credit risk may be higher than forecast as lending standards loosen.

JPMorgan CEO Jamie Dimon warned that losses in private credit could be significantly higher than current forecasts, saying lending standards have weakened broadly after years of strong growth.

Dimon’s warning on private credit losses

In a letter to shareholders published on April 6, Dimon said that when the credit cycle turns—something he expects to occur at some point—loans to highly indebted corporate borrowers will experience losses greater than expected.

“This is because lending standards have weakened to some extent across the board,” he said.

Dimon pointed to several factors contributing to “latent risks,” including increased use of optimistic assumptions about earnings, looser protection terms for lenders, and the prevalence of payment-in-kind (PIK) arrangements that allow borrowers to defer debt service.

Market context and lack of a downturn

Dimon said the private credit market is about $1.8 trillion and has grown strongly over the past decade, aided by post–financial crisis regulation that pushed traditional banks away from riskier segments.

He added that the sector has not yet endured a real credit downturn in a long time, noting: “There seems to be a view that it will never happen.”

Macroeconomic resilience and commodity risks

Dimon said the U.S. economy remains resilient, with consumers continuing to spend despite some signs of weakness.

However, he warned of large and prolonged shocks to oil and commodities due to the conflict in the Middle East.

Geopolitical tensions and uncertainty

Dimon identified geopolitical tensions as the biggest risk, particularly the wars in Ukraine and Iran and their impact on commodities and global markets, calling war an “area of uncertainty.”

He said the outcome of these geopolitical developments could “completely determine how the global economic order forms in the future,” adding, “But it may not.”

Trade policy and shifting economic relationships

He also referred to a “restructuring of global economic relationships” driven by U.S. trade policy, saying trade wars have not ended and many countries are reconsidering partnerships.

Banking regulation and capital requirements

On policy, Dimon criticized current banking regulations as fragmented, overlapping, and costly, saying they could weaken lending capacity.

Regarding Basel III Endgame and the surcharge for globally important banks (GSIBs), he argued that some rules remain “irrational” and could require banks to hold up to 50% more capital for the same loan than non-GSIB institutions.

“Frankly, that is wrong and not aligned with how the U.S. economy operates,” he said.

Europe’s economic challenge

Dimon said the U.S. “needs Europe to succeed,” but warned that the region is at a turning point.

“Europe is entering a decade of decision but cannot act,” he noted, adding that Europe has never completed an economic union (citing Mario Draghi’s report), leaving European countries underperforming economically.

He said Europe’s GDP relative to the U.S. has fallen from about 90% in 2000 to around 70% today.

Long-term outlook: AI and jobs

In the long run, Dimon said artificial intelligence (AI) will bring transformative changes to the economy, though it is too early to determine who will win.

He argued AI will create new jobs and replace some current roles, requiring companies to retrain and reorganize their workforce.

“We will deploy AI, like any other technology, to serve customers and employees better,” he wrote.