Jamie Dimon expects further weak links in ‘shadow banking’ sector to be revealed after collapse of two US firms
The boss of JP Morgan, Jamie Dimon, has warned over further losses linked to the private credit sector, saying more “cockroaches” could emerge after the collapse of the sub-prime auto lender Tricolor and the car parts supplier First Brands.
The bank said on Tuesday that although it had no exposure to First Brands, which sells car parts across the US, it had taken a $170m (£128m) hit from Tricolor, which collapsed amid fraud allegations last month.
Both firms had been backed by private credit within the so-called shadow banking sector, which is not directly regulated and is not forced to disclose the level of risks on their books. Regulated banks such as JP Morgan are exposed to the private credit sector, either by lending directly to private businesses, or lending to the private credit firms themselves.
The links between banks and private credit have raised concerns about the fallout from a potential downturn across the $3tn (£2.3tn) industry.
