JP Morgan Chase 2015 Annual Report Download - page 44

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Large banks such as JPMorgan Chase also
have a strong local presence. We are proud
to have branches and oces all across
the country and to have the privilege of
being woven into communities large and
small. But we respect the fact that for
some customers, there is no substitute
for a locally based bank and that in some
markets, a locally based lender is the best
fit for the needs of the community.
Having said that, these very same regional
and community banks depend on large
banks such as ours to make their service
oerings possible. First, large banks oer
vital correspondent banking services for
smaller institutions. These services include
distributing and collecting physical cash,
processing checks and clearing international
payments. JPMorgan Chase alone extends
such services to 339 small banks and 10
corporate credit unions across the country.
Last year, we provided these institutions with
$4.7 billion in intraday credit to facilitate
cash management activities and processed
$7.6 trillion in payments/receivables.
Large banks also enable community banks to
provide traditional mortgages by purchasing
the mortgages that smaller banks originate,
selling the loans to the agencies (e.g., Fannie
Mae) or capital markets and continuing to
service the borrower. In 2015, JPMorgan
Chase purchased $10.4 billion in such resi-
dential loans from 165 banks nationwide.
In addition to these correspondent banking
services, large banks deliver mission-critical
investment banking services. This includes
helping smaller banks access debt and equity
capital, supporting them through strategic
combinations, enabling them to manage
their securities portfolios, providing valuable
risk management tools (such as interest rate
swaps and foreign exchange), creating syndi-
cated credit facilities that smaller banks’
clients can participate in and oering direct
financing. JPMorgan Chase has raised $16.2
billion in growth equity capital for smaller
banks since 2014; advised on strategic
combinations among regional and commu-
nity banks valued at $52 billion; and, last
year, provided $5.3 billion in secured repo
financing, extended $1.4 billion in trading
line financing and provided $7 billion in
other unsecured financing to hundreds of
banks nationwide.
This is a story of symbiosis among our banks
rather than a binary choice between big and
small. Yes, all banks are competitors in the
marketplace. But marketplace competition
is not zero-sum. In banking, your compet-
itor can also be your customer. Large banks
ultimately would be diminished if regional
and community banks were weakened, and,
just as surely, those smaller institutions
would lose out if America’s large banks were
hobbled. We require a system that serves
the needs of all Americans, from customers
getting their first mortgage to farmers and
small business owners to our largest multina-
tional companies.
America faces enough real challenges
without inventing conflict where none
need exist. Rather, banks of all sizes do
themselves and their stakeholders better
service by acknowledging the specific value
dierent types of institutions oer. Then we
all can get on with the business of serving
our distinctive roles in strengthening the
economy, our communities and our country.
Banks cannot be utilities.
Utilities are monopolies; i.e., generally only
one company is operating in a market. And
because of that, prices and returns are regu-
lated. Banks do not have the same relation-
ship with their clients as most other compa-
nies do. When a customer walks into a store
and wants to buy an item, the store sells it.
By contrast, very often a bank needs to turn
a customer down; for example, in connec-
tion with a credit card or a loan. Responsible
lending is good, but irresponsible lending
is bad for the economy and for the client
(we clearly experienced this in the Great
Recession). Banks are more like partners
with their clients – and they are often active
participants in their clients’ financial aairs.
They frequently are in the position where
they have to insist that clients operate with
discipline – by asking for collateral, putting