JPMorgan's Dimon says leverage levels normalising

By Muralikumar Anantharaman and Rachelle Younglai

WASHINGTON (Reuters) - Financial institutions are closer to reducing their borrowings to levels that regulators and markets want, JPMorgan Chase & Co (JPM.N) Chairman and Chief Executive Jamie Dimon said on Thursday.

Under pressure to reduce the risk to their balance sheets, Wall Street banks have been cutting borrowing relative to assets in a bid to shore up capital amid the credit crisis.

"The de-leveraging process is well on its way. I don't know if it's half or 60 or 70 percent done. That will take another minimum six months," Dimon told delegates at an Investment Company Institute conference in Washington.

That process, which can entail shedding assets, issuing equity or paying off debt, has been painful for many banks and brokers.

Dimon said leverage has contributed to the problems in the capital markets and said Bear Stearns Cos Inc BSC.N, hedge funds and banks had taken more risk than they thought they did.

Attention on funding at the biggest U.S. investment banks has intensified since Bear Stearns nearly collapsed after its liquidity almost evaporated in March.

Now the U.S. Securities and Exchange Commission, which supervises the top investment banks, including Bear Stearns, is planning to require the firms to publicly disclose their current liquidity and capital positions.

BALANCED REGULATION NEEDED

Global banking regulators are trying to close gaps that let banks harbor risks out of regulatory sight and are pushing for higher capital charges for handling asset-backed securities.

U.S. lawmakers are pushing for stricter oversight of the investment banks because they were given emergency access to the Federal Reserve's discount borrowing window in March, as the credit crisis deepened.

"I do think it's completely legitimate for regulators to go back and say, okay, since we had to do that, we would look back at the things we should change and make sure the system doesn't have to go through that kind of thing again," Dimon said.

Investment banks are less regulated than commercial banks, which do have access to the central bank's discount window and are supervised by the Fed for safety and soundness.

"We can't have the discount window open so that people can take bigger bets," Dimon said.

Dimon, however, warned against too much regulation and said it could force investors to seek out more private investments such as private equity and hedge funds that are typically not transparent.

Dimon also said JPMorgan hopes to close on its acquisition of Bear Stearns around June 1. JPMorgan is offering $10 a share for Bear, up from an initial offer of around $2 a share.

"I've been through a lot of mergers, but I've never been through one like this," he added. "I got that call on Thursday night. If I ever get a call like that again, I'm going to say, wrong number."

Dimon said there was a lot of talent at Bear that JPMorgan would benefit from.

"We expect to get the benefits we told our shareholders about," he said.

(Editing by Andre Grenon)