JP Morgan Chase 2015 Annual Report Download - page 300

Notes to consolidated financial statements
290 JPMorgan Chase & Co./2015 Annual Report
Under the risk-based capital guidelines of the Federal
Reserve, JPMorgan Chase is required to maintain minimum
ratios of CET1, Tier 1 and Total capital to risk-weighted
assets, as well as minimum leverage ratios (which are
defined as Tier 1 capital divided by adjusted quarterly
average assets). Failure to meet these minimum
requirements could cause the Federal Reserve to take
action. Bank subsidiaries also are subject to these capital
requirements by their respective primary regulators. The
following table presents the minimum ratios to which the
Firm and its national bank subsidiaries are subject as of
December 31, 2015.
Minimum
capital ratios(a)
Well-capitalized ratios
BHC(b) IDI(c)
Capital ratios
CET1 4.5% —% 6.5%
Tier 1 6.0 6.0 8.0
Total 8.0 10.0 10.0
Tier 1 leverage 4.0 — 5.0
(a) As defined by the regulations issued by the Federal Reserve, OCC and FDIC
and to which the Firm and its national bank subsidiaries are subject.
(b) Represents requirements for bank holding companies pursuant to
regulations issued by the Federal Reserve.
(c) Represents requirements for bank subsidiaries pursuant to regulations
issued under the FDIC Improvement Act.
As of December 31, 2015 and 2014, JPMorgan Chase and
all of its banking subsidiaries were well-capitalized and met
all capital requirements to which each was subject.
Note 29 – Off–balance sheet lending-related
financial instruments, guarantees, and other
commitments
JPMorgan Chase provides lending-related financial
instruments (e.g., commitments and guarantees) to meet
the financing needs of its customers. The contractual
amount of these financial instruments represents the
maximum possible credit risk to the Firm should the
counterparty draw upon the commitment or the Firm be
required to fulfill its obligation under the guarantee, and
should the counterparty subsequently fail to perform
according to the terms of the contract. Most of these
commitments and guarantees expire without being drawn
or a default occurring. As a result, the total contractual
amount of these instruments is not, in the Firm’s view,
representative of its actual future credit exposure or
funding requirements.
To provide for probable credit losses inherent in wholesale
and certain consumer lending-commitments, an allowance
for credit losses on lending-related commitments is
maintained. See Note 15 for further information regarding
the allowance for credit losses on lending-related
commitments. The following table summarizes the
contractual amounts and carrying values of off-balance
sheet lending-related financial instruments, guarantees and
other commitments at December 31, 2015 and 2014. The
amounts in the table below for credit card and home equity
lending-related commitments represent the total available
credit for these products. The Firm has not experienced,
and does not anticipate, that all available lines of credit for
these products will be utilized at the same time. The Firm
can reduce or cancel credit card lines of credit by providing
the borrower notice or, in some cases as permitted by law,
without notice. In addition, the Firm typically closes credit
card lines when the borrower is 60 days or more past due.
The Firm may reduce or close home equity lines of credit
when there are significant decreases in the value of the
underlying property, or when there has been a
demonstrable decline in the creditworthiness of the
borrower.