Private equity firm Carlyle Group poached one of chief executive Jamie Dimon’s closest aides Michael Cavanagh from JPMorgan yesterday in a surprise hire that reflects both the increasing prominence of so-called shadow banking and the regulatory challenges faced by banks.

Mr Cavanagh (48), who was co-head of JPMorgan’s corporate and investment bank, will become the co-president and co-chief operating officer of Carlyle as the alternative asset manager puts its own succession plan in place.

He will also join Carlyle’s executive board.

He will share both new titles with Carlyle veteran Glenn Youngkin (47), who has until now been sole chief operating officer.

Mr Cavanagh’s departure is a blow to Mr Dimon, and sources familiar with the situation said the move came as a surprise to senior bank executives.

Mr Dimon hired Mr Cavanagh more than two decades ago and has worked with him ever since.

In recent years Mr Cavanagh, who was also a member of the bank’s operating committee, had come to be seen as one of the potential successors to the JPMorgan chairman and CEO.

Daniel Pinto, who had the same role as Mr Cavanagh, was named sole CEO of JPMorgan’s corporate and investment banking division.

Mr Cavanagh’s move underscores the challenges banks face in retaining talent amid an onslaught of regulations in the aftermath of the financial crisis, which have complicated bank managers’ jobs and reduced their pay.

Several other long-time bankers, such as former JPMorgan executives Jes Staley and Steven Black, have moved in recent years to private equity, hedge funds and other more lightly regulated corners of high finance, broadly referred to as shadow banking.

The sector offers executives more business opportunities as banks pull back, as well as higher pay. – (Reuters)