Securities financing activities

JPMorgan Chase enters into resale agreements, repurchase agreements, securities borrowed transactions and securities loaned transactions (collectively, “securities financing agreements”) primarily to finance the Firm’s inventory positions, acquire securities to cover short positions, accommodate customers’ financing needs, and settle other securities obligations.

Securities financing agreements are treated as collateralized financings on the Firm’s Consolidated balance sheets. Resale and repurchase agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased. Securities borrowed and securities loaned transactions are generally carried at the amount of cash collateral advanced or received. Where appropriate under applicable accounting guidance, resale and repurchase agreements with the same counterparty are reported on a net basis. For further discussion of the offsetting of assets and liabilities, see Note 1. Fees received and paid in connection with securities financing agreements are recorded in interest income and interest expense on the Consolidated statements of income.

The Firm has elected the fair value option for certain securities financing agreements. For further information regarding the fair value option, see Note 4. The securities financing agreements for which the fair value option has been elected are reported within securities purchased under resale agreements; securities loaned or sold under repurchase agreements; and securities borrowed on the Consolidated balance sheets. Generally, for agreements carried at fair value, current-period interest accruals are recorded within interest income and interest expense, with changes in fair value reported in principal transactions revenue. However, for financial instruments containing embedded derivatives that would be separately accounted for in accordance with accounting guidance for hybrid instruments, all changes in fair value, including any interest elements, are reported in principal transactions revenue.

The following table presents as of December 31, 2014 and 2013, the gross and net securities purchased under resale agreements and securities borrowed. Securities purchased under resale agreements have been presented on the Consolidated balance sheets net of securities sold under repurchase agreements where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement, and where the other relevant criteria have been met. Where such a legal opinion has not been either sought or obtained, the securities purchased under resale agreements are not eligible for netting and are shown separately in the table below. Securities borrowed are presented on a gross basis on the Consolidated balance sheets.



	2014								2013
December 31, (in millions)	Gross asset balance		Amounts netted on the Consolidated balance sheets			Net asset balance			Gross asset balance		Amounts netted on the Consolidated balance sheets			Net asset balance
Securities purchased under resale agreements
Securities purchased under resale agreements with an appropriate legal opinion	$	341,989	$	(142,719	)	$	199,270		$	354,814	$	(115,408	)	$	239,406
Securities purchased under resale agreements where an appropriate legal opinion has not been either sought or obtained	15,751					15,751			8,279					8,279
Total securities purchased under resale agreements	$	357,740	$	(142,719	)	$	215,021	^(a)	$	363,093	$	(115,408	)	$	247,685	^(a)
Securities borrowed	$	110,435	N/A			$	110,435	^(b)(c)	$	111,465	N/A			$	111,465	^(b)(c)


(a)	At December 31, 2014 and 2013, included securities purchased under resale agreements of $28.6 billion and $25.1 billion, respectively, accounted for at fair value.


(b)	At December 31, 2014 and 2013, included securities borrowed of $992 million and $3.7 billion, respectively, accounted for at fair value.


(c)	Included $28.0 billion and $26.9 billion at December 31, 2014 and 2013, respectively, of securities borrowed where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement.

The following table presents information as of December 31, 2014 and 2013, regarding the securities purchased under resale agreements and securities borrowed for which an appropriate legal opinion has been obtained with respect to the master netting agreement. The below table excludes information related to resale agreements and securities borrowed where such a legal opinion has not been either sought or obtained.



	2014										2013
			Amounts not nettable on the Consolidated balance sheets^(a)										Amounts not nettable on the Consolidated balance sheets^(a)
December 31, (in millions)	Net asset balance		Financial instruments^(b)			Cash collateral			Net exposure		Net asset balance		Financial instruments^(b)			Cash collateral			Net exposure
Securities purchased under resale agreements with an appropriate legal opinion	$	199,270	$	(196,136	)	$	(232	)	$	2,902	$	239,406	$	(234,495	)	$	(98	)	$	4,813
Securities borrowed	$	82,464	$	(80,267	)	$	—		$	2,197	$	84,531	$	(81,127	)	$	—		$	3,404

(a)

For some counterparties, the sum of the financial instruments and cash collateral not nettable on the Consolidated balance sheets may exceed the net asset balance. Where this is the case the total amounts reported in these two columns are limited to the balance of the net reverse repurchase agreement or securities borrowed asset with that counterparty. As a result a net exposure amount is reported even though the Firm, on an aggregate basis for its securities purchased under resale agreements and securities borrowed, has received securities collateral with a total fair value that is greater than the funds provided to counterparties.


(b)	Includes financial instrument collateral received, repurchase liabilities and securities loaned liabilities with an appropriate legal opinion with respect to the master netting agreement; these amounts are not presented net on the Consolidated balance sheets because other U.S. GAAP netting criteria are not met.

The following table presents as of December 31, 2014 and 2013, the gross and net securities sold under repurchase agreements and securities loaned. Securities sold under repurchase agreements have been presented on the Consolidated balance sheets net of securities purchased under resale agreements where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement, and where the other relevant criteria have been met. Where such a legal opinion has not been either sought or obtained, the securities sold under repurchase agreements are not eligible for netting and are shown separately in the table below. Securities loaned are presented on a gross basis on the Consolidated balance sheets.



	2014								2013
December 31, (in millions)	Gross liability balance		Amounts netted on the Consolidated balance sheets			Net liability balance			Gross liability balance			Amounts netted on the Consolidated balance sheets			Net liability balance
Securities sold under repurchase agreements
Securities sold under repurchase agreements with an appropriate legal opinion	$	289,619	$	(142,719	)	$	146,900		$	257,630	^(f)	$	(115,408	)	$	142,222	^(f)
Securities sold under repurchase agreements where an appropriate legal opinion has not been either sought or obtained^(a)	22,906					22,906			18,143		^(f)				18,143		^(f)
Total securities sold under repurchase agreements	$	312,525	$	(142,719	)	$	169,806	^(c)	$	275,773		$	(115,408	)	$	160,365	^(c)
Securities loaned^(b)	$	25,927	N/A			$	25,927	^(d)(e)	$	25,769		N/A			$	25,769	^(d)(e)


(a)	Includes repurchase agreements that are not subject to a master netting agreement but do provide rights to collateral.


(b)	Included securities-for-securities borrow vs. pledge transactions of $4.1 billion and $5.8 billion at December 31, 2014 and 2013, respectively, when acting as lender and as presented within other liabilities in the Consolidated balance sheets.


(c)	At December 31, 2014 and 2013, included securities sold under repurchase agreements of $3.0 billion and $4.9 billion, respectively, accounted for at fair value.


(d)	At December 31, 2013, included securities loaned of $483 million accounted for at fair value; there were no securities loaned accounted for at fair value at December 31, 2014.


(e)	Included $537 million and $397 million at December 31, 2014 and 2013, respectively, of securities loaned where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement.


(f)	The prior period amounts have been revised with a corresponding impact in the table below. This revision had no impact on the Firm’s Consolidated balance sheets or its results of operations.

The following table presents information as of December 31, 2014 and 2013, regarding the securities sold under repurchase agreements and securities loaned for which an appropriate legal opinion has been obtained with respect to the master netting agreement. The below table excludes information related to repurchase agreements and securities loaned where such a legal opinion has not been either sought or obtained.



	2014										2013
			Amounts not nettable on the Consolidated balance sheets^(a)											Amounts not nettable on the Consolidated balance sheets^(a)
December 31, (in millions)	Net liability balance		Financial instruments^(b)			Cash collateral			Net amount^(c)		Net liability balance			Financial instruments^(b)				Cash collateral			Net amount^(c)
Securities sold under repurchase agreements with an appropriate legal opinion	$	146,900	$	(143,985	)	$	(363	)	$	2,552	$	142,222	^(d)	$	(139,051	)	^(d)	$	(450	)	$	2,721
Securities loaned	$	25,390	$	(25,040	)	$	—		$	350	$	25,372		$	(25,125	)		$	—		$	247


(a)	For some counterparties the sum of the financial instruments and cash collateral not nettable on the Consolidated balance sheets may exceed the net liability balance. Where this is the case the total amounts reported in these two columns are limited to the balance of the net repurchase agreement or securities loaned liability with that counterparty.


(b)	Includes financial instrument collateral transferred, reverse repurchase assets and securities borrowed assets with an appropriate legal opinion with respect to the master netting agreement; these amounts are not presented net on the Consolidated balance sheets because other U.S. GAAP netting criteria are not met.


(c)	Net amount represents exposure of counterparties to the Firm.


(d)	The prior period amounts have been revised with a corresponding impact in the table above. This revision had no impact on the Firm’s Consolidated balance sheets or its results of operations.

JPMorgan Chase’s policy is to take possession, where possible, of securities purchased under resale agreements and of securities borrowed. The Firm monitors the value of the underlying securities (primarily G7 government securities, U.S. agency securities and agency MBS, and equities) that it has received from its counterparties and either requests additional collateral or returns a portion of the collateral when appropriate in light of the market value of the underlying securities. Margin levels are established initially based upon the counterparty and type of collateral and monitored on an ongoing basis to protect against declines in collateral value in the event of default. JPMorgan Chase typically enters into master netting agreements and other collateral arrangements with its resale agreement and securities borrowed counterparties, which provide for the right to liquidate the purchased or borrowed securities in the event of a customer default. As a result of the Firm’s credit risk mitigation practices with respect to resale and securities borrowed agreements as described above, the Firm did not hold any reserves for credit impairment with respect to these agreements as of December 31, 2014 and 2013.

For further information regarding assets pledged and collateral received in securities financing agreements, see Note 30.

Transfers not qualifying for sale accounting

In addition, at December 31, 2014 and 2013, the Firm held $13.8 billion and $14.6 billion, respectively, of financial assets for which the rights have been transferred to third parties; however, the transfers did not qualify as a sale in accordance with U.S. GAAP. These transfers have been recognized as collateralized financing transactions. The transferred assets are recorded in trading assets, other assets and loans, and the corresponding liabilities are predominantly recorded in other borrowed funds on the Consolidated balance sheets.