In the event of a severe economic downturn, JPMorgan Chase has enough capital to absorb the losses, assumed by the annual stress test administered by the Federal Reserve, of the 31 largest banks in the country, according to JPMorgan Chase’s 2015 Annual Report released this week.
“We have an extraordinary amount of capital to sustain us in the event of losses,” JPMorgan Chase CEO Jamie Dimon said in the letter to shareholders. “It is instructive to compare assumed extreme losses against how much capital we have for this purpose.”
Dimon went on to say that “JPMorgan Chase alone has enough loss absorbing resources to bear all the losses, assumed by CCAR (Comprehensive Capital Analysis & Review), of the 31 largest banks in the United States.”
The data presented in the report by JPMorgan Chase showed that the bank was prepared to absorb $350 billion worth of total losses. By comparison, the CCAR stress test assumed losses of $222 billion for the 31 tested banks (including JPMorgan Chase) in severely adverse economic conditions.
Regulations brought on since the crisis that require banks to hold higher capital levels virtually ensure that if one bank fails, there will be no domino effect, according to Dimon.
Dimon said the bank runs hundreds of stress tests internally each week across the bank’s global trading operations to ensure that the bank can withstand the most severely adverse economic situations, including scenarios comparable to the 2008 financial crisis. He said even under the worst market conditions, JPMorgan Chase would almost never bear a loss of more than $5 billion.
“We recognize that on rare occasions, we could experience a negative significant event that could lead to our having a poor quarter,” Dimon said. “But we will be vigilant and will never take such a high degree of risk that it jeopardizes the health of our company and our ability to continue to serve our clients.”
JPMorgan Chase reported a net income of $5.4 billion for the fourth quarter of 2015 and a net income of $24.4 billion for the full year. The bank’s Q1 2016 earnings statement will be released on Wednesday, April 13.
Click here to view the complete JPMorgan Chase 2015 Annual Report.