JP Morgan Chase 2014 Annual Report Download - page 28

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III. A NEW GLOBAL FINANCIAL ARCHITECTURE
be completed in 2015. First, the regulators
have almost finished plans around total loss-
absorbing capacity, which will require large
banks to hold a lot of additional long-term
debt, which could be converted to equity in
the event of a failure and thereby enable the
firm to remain open to serve customers and
markets. Second, the industry agreed to put
in place specific rules and guidelines on how
to deal globally with derivatives contracts of
a failed institution. This gives regulators and
governments the knowledge that, in a failure,
derivatives contracts can be properly managed
and will not make the situation worse.
The industry will be stronger and safer
because of all of the new regulations, and the
future is bright for well-run banks
There is no question that, today, the global
banking system is safer and stronger –
possibly more so than it has ever been.
That is not to say that the changes do
not create a whole range of challenges,
complexities and new risks (which we will
talk about in the next section). But at the
end of the day, the system will be safer
and more stable than ever. I may sound
a little like Voltaire’s optimistic character
Dr. Pangloss for saying this, but I am
hopeful that in the next five to 10 years,
high-quality banks will be thriving in their
work to support economies and help society.