JP Morgan Chase 2013 Annual Report Download - page 249

JPMorgan Chase & Co./2013 Annual Report 255
Note 13 – Securities financing activities
JPMorgan Chase enters into resale agreements, repurchase
agreements, securities borrowed transactions and securities
loaned transactions (collectively, “securities financing
agreements”) primarily to finance the Firm’s inventory
positions, acquire securities to cover short positions,
accommodate customers’ financing needs, and settle other
securities obligations.
Securities financing agreements are treated as
collateralized financings on the Firm’s Consolidated Balance
Sheets. Resale and repurchase agreements are generally
carried at the amounts at which the securities will be
subsequently sold or repurchased. Securities borrowed and
securities loaned transactions are generally carried at the
amount of cash collateral advanced or received. Where
appropriate under applicable accounting guidance, resale
and repurchase agreements with the same counterparty are
reported on a net basis. For further discussion of the
offsetting of assets and liabilities, see Note 1 on pages 189–
191 of this Annual Report. Fees received and paid in
connection with securities financing agreements are
recorded in interest income and interest expense on the
Consolidated Statements of Income.
The Firm has elected the fair value option for certain
securities financing agreements. For further information
regarding the fair value option, see Note 4 on pages 215–
218 of this Annual Report. The securities financing
agreements for which the fair value option has been elected
are reported within securities purchased under resale
agreements; securities loaned or sold under repurchase
agreements; and securities borrowed on the Consolidated
Balance Sheets. Generally, for agreements carried at fair
value, current-period interest accruals are recorded within
interest income and interest expense, with changes in fair
value reported in principal transactions revenue. However,
for financial instruments containing embedded derivatives
that would be separately accounted for in accordance with
accounting guidance for hybrid instruments, all changes in
fair value, including any interest elements, are reported in
principal transactions revenue.
The following table presents as of December 31, 2013 and 2012, the gross and net securities purchased under resale
agreements and securities borrowed. Securities purchased under resale agreements have been presented on the Consolidated
Balance Sheets net of securities sold under repurchase agreements where the Firm has obtained an appropriate legal opinion
with respect to the master netting agreement, and where the other relevant criteria have been met. Where such a legal opinion
has not been either sought or obtained, the securities purchased under resale agreements are not eligible for netting and are
shown separately in the table below. Securities borrowed are presented on a gross basis on the Consolidated Balance Sheets.
2013 2012
December 31, (in millions) Gross asset balance
Amounts
netted on the
Consolidated
Balance
Sheets Net asset balance Gross asset balance
Amounts
netted on the
Consolidated
Balance
Sheets Net asset balance
Securities purchased under resale agreements
Securities purchased under resale agreements
with an appropriate legal opinion $ 354,814 $ (115,408) $ 239,406 $ 381,377 $ (96,947) $ 284,430
Securities purchased under resale agreements
where an appropriate legal opinion has not
been either sought or obtained 8,279 8,279 10,983 10,983
Total securities purchased under resale
agreements $ 363,093 $ (115,408) $ 247,685 (a) $ 392,360 $ (96,947) $ 295,413 (a)
Securities borrowed $ 111,465 N/A $ 111,465 (b)(c) $ 119,017 N/A $ 119,017 (b)(c)
(a) At December 31, 2013 and 2012, included securities purchased under resale agreements of $25.1 billion and $24.3 billion, respectively, accounted for at
fair value.
(b) At December 31, 2013 and 2012, included securities borrowed of $3.7 billion and $10.2 billion, respectively, accounted for at fair value.
(c) Included $26.9 billion and $28.4 billion at December 31, 2013 and 2012, respectively, of securities borrowed where an appropriate legal opinion has not
been either sought or obtained with respect to the master netting agreement. The prior period amounts have been revised with a corresponding impact in
the table below. This revision had no impact on the Firm’s Consolidated Balance Sheets or its results of operations.