JP Morgan Chase 2010 Annual Report Download - page 13

11
global playing field – potentially is large.
These unpredictable outcomes and unin-
tended consequences could aect far more
than products and pricing. For example, if a
business cannot sell certain products or if the
cost of selling them is so high that it cannot
be adequately recouped, that business risks
losing all of its clients. A simple analogy: If a
restaurant that sells burgers can’t sell french
fries, it risks losing all of its customers.
Like it or not, we will adjust to the impact
of new regulation on financial products and
pricing. But we will remain vigilant about
the changes that could threaten or under-
mine entire businesses. Three of our main
concerns are:
First, and most important, we want to ensure
that our clients are not negatively aected in
a material way and that our ability to prop-
erly serve them is not unduly compromised.
Second, we need to be cautious about the
creation of non-banks or new shadow banks.
This could happen if the cumulative eect of
all the regulations not only hampers banks
from conducting their business but restricts
them so much that the business slowly and
inevitably moves to non-banks.
And, third, we need to ensure that American
banks are not significantly disadvantaged
relative to their global counterparts. The
cumulative eect of higher capital standards,
too restrictive market-making and deriva-
tives rules, price control and arbitrary bank
taxes could significantly impede our ability
to compete over the long run.
Wedon’texpectanyofthesethreeoutcomes
to occur – nor do we believe that it was or is
the intent of the lawmakers or regulators –
but it bears paying close attention.
Although we tend to focus on the downside
of unintended consequences, we should
recognize that there may be some positive
consequences. For example, large changes
in business regulations and dynamics often
lead to new businesses, innovations and new
products. Also, our ability to compete may
be hampered in some instances but actu-
ally helped in others. For example, the cost
and complexity of all the recent regulations,
ironically, could create greater barriers for
new entrants and new competitors.