JP Morgan Chase 2015 Annual Report Download - page 149

JPMorgan Chase & Co./2015 Annual Report 139
Effective January 1, 2015, the Firm conducts earnings-at-
risk simulations for assets and liabilities denominated in
U.S. dollars separately from assets and liabilities
denominated in non-U.S. dollar currencies in order to
enhance the Firm’s ability to monitor structural interest rate
risk from non-U.S. dollar exposures.
The Firm’s U.S. dollar sensitivity is presented in the table
below. The result of the non-U.S. dollar sensitivity scenarios
were not material to the Firm’s earnings-at-risk at
December 31, 2015.
JPMorgan Chase’s 12-month pretax net interest income
sensitivity profiles
(Excludes the impact of CIB’s markets-based activities and
MSRs)
(in billions) Instantaneous change in rates
December 31, 2015 +200 bps +100 bps -100 bps -200 bps
U.S. dollar $ 5.2 $ 3.1 NM (a) NM (a)
(a) Downward 100- and 200-basis-points parallel shocks result in a
federal funds target rate of zero and negative three- and six-month
U.S. Treasury rates. The earnings-at-risk results of such a low
probability scenario are not meaningful.
The Firm’s benefit to rising rates on U.S. dollar assets and
liabilities is largely a result of reinvesting at higher yields
and assets repricing at a faster pace than deposits. The
Firm’s net U.S. dollar sensitivity profile at December 31,
2015 was not materially different than December 31,
2014.
Separately, another U.S. dollar interest rate scenario used
by the Firm — involving a steeper yield curve with long-term
rates rising by 100 basis points and short-term rates
staying at current levels — results in a 12-month pretax
benefit to net interest income, excluding CIB’s markets-
based activities and MSRs, of approximately $700 million.
The increase in net interest income under this scenario
reflects the Firm reinvesting at the higher long-term rates,
with funding costs remaining unchanged. The result of the
comparable non-U.S. dollar scenario was not material to the
Firm.
Non-U.S. dollar FX Risk
Non-U.S. dollar FX risk is the risk that changes in foreign
exchange rates affect the value of the Firm’s assets or
liabilities or future results. The Firm has structural non-U.S.
dollar FX exposures arising from capital investments,
forecasted expense and revenue, the investment securities
portfolio and issuing debt in denominations other than the
U.S. dollar. Treasury and CIO, working in partnership with
the lines of business, primarily manage these risks on
behalf of the Firm. Treasury and CIO may hedge certain of
these risks using derivatives within risk limits governed by
the CTC Risk Committee.