JP Morgan Chase 2013 Annual Report Download - page 35

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Safeguarding the business
simplifying our business model,
eliminating products and services
that are not essential to serving our
customers and are not core to our
businesses. We are ensuring that our
systems, practices, controls, technol-
ogy and, above all, culture meet the
highest standards.
Liquidity and interest rate risk
management more critical than ever
Last year, we continued to advance
our approach to liquidity and inter-
est rate risk management, corner-
stones of safety and soundness. We
have focused on striking the appro-
priate calibration when it comes to
managing our balance sheet, protect-
ing the deposits our clients and cus-
tomers entrust to us and, ultimately,
our shareholders.
2013 represents a year of significant
progress in managing the firm’s
liquidity risk. We evolved our inter-
nal liquidity framework to ensure
that the firm has sucient liquidity
resources to continue business-as-
usual operations under both a short-
term and prolonged market and
company-specific stress. Consistent
with this new framework, we more
narrowly defined the JPMorgan
Chase liquid asset buer available to
meet short-term liquidity needs to be
more conservative and consistent
with the scale of our balance sheet.
We further built out technology that
will enable more flexible and timely
liquidity stress testing for the enter-
prise and our major legal entities.
Our internal framework is more
conservative than the related Basel
liquidity measures. Compliance
with our framework, which was
achieved in 2013, results in the firm
exceeding regulatory minimums,
notably the Basel III Liquidity
Coverage Ratio. Of course, we are
diligent in understanding new
regulations as they are introduced
and stand ready to comply.
We continued to make strides in
advancing our Asset-Liability Man-
agement (ALM) capabilities, which
are critically important as we con-
template the reversal of Fed mone-
tary policy and the ensuing impact
on interest rates. We established a
global ALM portfolio strategy team
in 2013, whose mandate includes
working across the firm to ensure
consistency in our analytical
approach and modeling in relation to
structural interest rate risk. A signifi-
cant area of focus for us this past
year was advancing our scenario and
analytical capabilities, including
materially investing in our technol-
ogy and supporting infrastructure to
allow for more dynamic analysis.
We continue to actively and conser-
vatively manage our substantial
investment securities portfolio,
which is the primary vehicle we use
to manage our firmwide structural
interest rate risk. In 2013, we applied
held-to-maturity accounting for cer-
tain investment securities the firm
purchased, which will help to miti-
gate Basel III capital volatility in a
Our goal is to be the safest, soundest
and most profitable financial services
company in the world, doing the
highest-quality business and deliver-
ing to our clients and customers
best-in-class products every day.
How we operate as a company is key
to accomplishing that goal. Looking
across our entire enterprise, the
Chief Operating Ocer’s oce drives
many of the processes and corporate
utilities, as well as the infrastructure,
to that end, ranging from managing
the firm’s liquidity, funding and
structural interest rate risk to over-
seeing strategic firmwide functions
such as global Technology and
Operations, Oversight and Control,
Compliance, Corporate Strategy and
Regulatory Aairs, among others.
In the past year, we re-prioritized
our major projects and initiatives,
deployed massive new resources and
refocused critical managerial time
on these eorts. We’ve enhanced
significantly our governance process
and developed a system for manage-
ment reporting that enables much
greater transparency up to senior
management and our Board. We are
Matt Zames