JP Morgan Chase 2015 Annual Report Download - page 276

Notes to consolidated financial statements
266 JPMorgan Chase & Co./2015 Annual Report
Note 16 – Variable interest entities
For a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs, see Note 1.
The following table summarizes the most significant types of Firm-sponsored VIEs by business segment. The Firm considers a
“sponsored” VIE to include any entity where: (1) JPMorgan Chase is the primary beneficiary of the structure; (2) the VIE is
used by JPMorgan Chase to securitize Firm assets; (3) the VIE issues financial instruments with the JPMorgan Chase name; or
(4) the entity is a JPMorgan Chase–administered asset-backed commercial paper conduit.
Line-of-Business Transaction Type Activity Annual Report
page references
CCB Credit card securitization trusts Securitization of both originated and purchased
credit card receivables 266
Mortgage securitization trusts Servicing and securitization of both originated and
purchased residential mortgages 267–269
CIB Mortgage and other securitization trusts Securitization of both originated and purchased
residential and commercial mortgages and student
loans
267–269
Multi-seller conduits
Investor intermediation activities:
Assist clients in accessing the financial markets in a
cost-efficient manner and structures transactions to
meet investor needs
269–271
Municipal bond vehicles 269–270
The Firm’s other business segments are also involved with VIEs, but to a lesser extent, as follows:
• Asset Management: AM sponsors and manages certain funds that are deemed VIEs. As asset manager of the funds, AM
earns a fee based on assets managed; the fee varies with each fund’s investment objective and is competitively priced. For
fund entities that qualify as VIEs, AM’s interests are, in certain cases, considered to be significant variable interests that
result in consolidation of the financial results of these entities.
• Commercial Banking: CB makes investments in and provides lending to community development entities that may meet the
definition of a VIE. In addition, CB provides financing and lending-related services to certain client-sponsored VIEs. In
general, CB does not control the activities of these entities and does not consolidate these entities.
• Corporate: The Private Equity business, within Corporate, is involved with entities that may meet the definition of VIEs.
However, the Firm’s Private Equity business is generally subject to specialized investment company accounting, which does
not require the consolidation of investments, including VIEs.
The Firm also invests in and provides financing and other services to VIEs sponsored by third parties, as described on page 271
of this Note.
Significant Firm-sponsored variable interest entities
Credit card securitizations
The Card business securitizes both originated and
purchased credit card loans, primarily through the Chase
Issuance Trust (the “Trust”). The Firm’s continuing
involvement in credit card securitizations includes servicing
the receivables, retaining an undivided seller’s interest in
the receivables, retaining certain senior and subordinated
securities and maintaining escrow accounts.
The Firm is considered to be the primary beneficiary of
these Firm-sponsored credit card securitization trusts based
on the Firm’s ability to direct the activities of these VIEs
through its servicing responsibilities and other duties,
including making decisions as to the receivables that are
transferred into those trusts and as to any related
modifications and workouts. Additionally, the nature and
extent of the Firm’s other continuing involvement with the
trusts, as indicated above, obligates the Firm to absorb
losses and gives the Firm the right to receive certain
benefits from these VIEs that could potentially be
significant.
The underlying securitized credit card receivables and other
assets of the securitization trusts are available only for
payment of the beneficial interests issued by the
securitization trusts; they are not available to pay the Firm’s
other obligations or the claims of the Firm’s other creditors.
The agreements with the credit card securitization trusts
require the Firm to maintain a minimum undivided interest
in the credit card trusts (which is generally 4%). As of
December 31, 2015 and 2014, the Firm held undivided
interests in Firm-sponsored credit card securitization trusts
of $13.6 billion and $10.9 billion, respectively. The Firm
maintained an average undivided interest in principal
receivables owned by those trusts of approximately 22%
for both the years ended December 31, 2015 and 2014. As
of December 31, 2015 and 2014, the Firm also retained $0
million and $40 million of senior securities, and as of both
December 31, 2015 and 2014, retained $5.3 billion of
subordinated securities in certain of its credit card
securitization trusts. The Firm’s undivided interests in the
credit card trusts and securities retained are eliminated in
consolidation.