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. For further discussion of lending-related commitments and guarantees, and the Firm’s related accounting policies, see Note 29 of JPMorgan Chase’s 2015 Annual Report.

To provide for probable credit losses inherent in wholesale and certain consumer lending-related commitments, an allowance for credit losses on lending-related commitments is maintained. See Note 14 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 March 31, 2016, and December 31, 2015. 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.



Off–balance sheet lending-related financial instruments, guarantees and other commitments
	Contractual amount												Carrying value^(h)
	March 31, 2016										Dec 31, 2015		Mar 31, 2016			Dec 31, 2015
By remaining maturity (in millions)	Expires in 1 year or less		Expires after 1 year through 3 years		Expires after 3 years through 5 years		Expires after 5 years		Total		Total
Lending-related
Consumer, excluding credit card:
Home equity	$	3,852	$	7,304	$	1,226	$	10,072	$	22,454	$	22,756	$	—		$	—
Residential mortgage^(a)	14,257		—		—		—		14,257		12,992		—			—
Auto	9,635		1,036		149		89		10,909		10,237		2			2
Business banking	11,577		808		131		461		12,977		12,351		12			12
Student and other	10		2		—		135		147		142		—			—
Total consumer, excluding credit card	$	39,331	$	9,150	$	1,506	$	10,757	$	60,744	$	58,478	$	14		$	14
Credit card	$	532,224	$	—	$	—	$	—	$	532,224	$	515,518	$	—		$	—
Total consumer^(b)	$	571,555	$	9,150	$	1,506	$	10,757	$	592,968	$	573,996	$	14		$	14
Wholesale:
Other unfunded commitments to extend credit^(c)(d)	$	84,759	$	95,130	$	138,588	$	7,724	$	326,201	$	323,325	$	843		$	649
Standby letters of credit and other financial guarantees^(c)(d)	17,151		12,605		5,216		2,968		37,940		39,133		612			548
Other letters of credit^(c)	3,043		204		75		3		3,325		3,941		2			2
Total wholesale^(e)	$	104,953	$	107,939	$	143,879	$	10,695	$	367,466	$	366,399	$	1,457		$	1,199
Total lending-related	$	676,508	$	117,089	$	145,385	$	21,452	$	960,434	$	940,395	$	1,471		$	1,213
Other guarantees and commitments
Securities lending indemnification agreements and guarantees^(f)	$	198,921	$	—	$	—	$	—	$	198,921	$	183,329	$	—		$	—
Derivatives qualifying as guarantees	2,478		251		11,307		39,120		53,156		53,784		198			222
Unsettled reverse repurchase and securities borrowing agreements	62,371		—		—		—		62,371		42,482		—			—
Unsettled repurchase and securities lending agreements	61,720		—		—		—		61,720		21,798		—			—
Loan sale and securitization-related indemnifications:
Mortgage repurchase liability	NA		NA		NA		NA		NA		NA		148			148
Loans sold with recourse	NA		NA		NA		NA		3,979		4,274		73			82
Other guarantees and commitments^(g)	443		2,656		1,057		1,518		5,674		5,580		(88		)	(94		)


(a)	Includes certain commitments to purchase loans from correspondents.


(b)	Predominantly all consumer lending-related commitments are in the U.S.

(c)

At March 31, 2016, and December 31, 2015, reflects the contractual amount net of risk participations totaling $339 million and $385 million, respectively, for other unfunded commitments to extend credit; $11.3 billion and $11.2 billion, respectively, for standby letters of credit and other financial guarantees; and $395 million and $341 million, respectively, for other letters of credit. In regulatory filings with the Federal Reserve these commitments are shown gross of risk participations.

(d)

At March 31, 2016, and December 31, 2015, included credit enhancements and bond and commercial paper liquidity commitments to U.S. states and municipalities, hospitals and other non-profit entities of $12.2 billion and $12.3 billion, respectively, within other unfunded commitments to extend credit; and $9.2 billion and $9.6 billion, respectively, within standby letters of credit and other financial guarantees. Other unfunded commitments to extend credit also include liquidity facilities to nonconsolidated municipal bond VIEs; see Note 15.


(e)	At March 31, 2016, and December 31, 2015, the U.S. portion of the contractual amount of total wholesale lending-related commitments was 78% and 77%, respectively.


(f)	At March 31, 2016, and December 31, 2015, collateral held by the Firm in support of securities lending indemnification agreements was $206.3 billion and $190.6 billion, respectively. Securities lending collateral consists of primarily cash and securities issued by governments that are members of the Organisation for Economic Co-operation and Development (“OECD”) and U.S. government agencies.

(g)

At March 31, 2016, and December 31, 2015, included unfunded commitments of $49 million and $50 million, respectively, to third-party private equity funds; and $830 million and $871 million, at March 31, 2016, and December 31, 2015, respectively, to other equity investments. These commitments included $70 million and $73 million, respectively, related to investments that are generally fair valued at net asset value as discussed in Note 3. In addition, at both March 31, 2016, and December 31, 2015, included letters of credit hedged by derivative transactions and managed on a market risk basis of $4.6 billion.


(h)	For lending-related products, the carrying value represents the allowance for lending-related commitments and the guarantee liability; for derivative-related products, the carrying value represents the fair value.

Other unfunded commitments to extend credit

Other unfunded commitments to extend credit generally consist of commitments for working capital and general corporate purposes, extensions of credit to support commercial paper facilities and bond financings in the event that those obligations cannot be remarketed to new investors, as well as committed liquidity facilities to clearing organizations. The Firm also issues commitments under multipurpose facilities which could be drawn upon in several forms, including the issuance of a standby letter of credit.

Also included in other unfunded commitments to extend credit are commitments to noninvestment-grade counterparties in connection with leveraged finance activities, which were $35.5 billion and $32.1 billion at March 31, 2016, and December 31, 2015, respectively.

The Firm acts as a settlement and custody bank in the U.S. tri-party repurchase transaction market. In its role as settlement and custody bank, the Firm is exposed to the intra-day credit risk of its cash borrower clients, usually broker-dealers. This exposure arises under secured clearance advance facilities that the Firm extends to its clients (i.e., cash borrowers); these facilities contractually limit the Firm’s intra-day credit risk to the facility amount

and must be repaid by the end of the day. As of both March 31, 2016, and December 31, 2015, the secured clearance advance facility maximum outstanding commitment amount was $2.9 billion.

Standby letters of credit and other financial guarantees

Standby letters of credit (“SBLC”) and other financial guarantees are conditional lending commitments issued by the Firm to guarantee the performance of a customer to a third party under certain arrangements, such as commercial paper facilities, bond financings, acquisition financings, trade and similar transactions.

The following table summarizes the standby letters of credit and other letters of credit arrangements as of March 31, 2016, and December 31, 2015.

Standby letters of credit, other financial guarantees and other letters of credit



	March 31, 2016				December 31, 2015
(in millions)	Standby letters of credit and other financial guarantees		Other letters of credit		Standby letters of credit and other financial guarantees		Other letters of credit
Investment-grade^(a)	$	30,383	$	2,640	$	31,751	$	3,290
Noninvestment-grade^(a)	7,557		685		7,382		651
Total contractual amount	$	37,940	$	3,325	$	39,133	$	3,941

Allowance for lending-related commitments	$	155	$	2	$	121	$	2
Guarantee liability	457		—		427		—
Total carrying value	$	612	$	2	$	548	$	2

Commitments with collateral	$	18,874	$	975	$	18,825	$	996


(a)	The ratings scale is based on the Firm’s internal ratings which generally correspond to ratings as defined by S&P and Moody’s.

Derivatives qualifying as guarantees

In addition to the contracts described above, the Firm transacts certain derivative contracts that have the characteristics of a guarantee under U.S. GAAP. For further information on these derivatives, see Note 29 of JPMorgan Chase’s 2015 Annual Report. The total notional value of the derivatives that the Firm deems to be guarantees was $53.2 billion and $53.8 billion at March 31, 2016, and December 31, 2015, respectively. The notional amount generally represents the Firm’s maximum exposure to derivatives qualifying as guarantees. However, exposure to certain stable value contracts is contractually limited to a substantially lower percentage of the notional amount; the notional amount on these stable value contracts was $28.5 billion and $28.4 billion at March 31, 2016, and December 31, 2015, respectively, and the maximum exposure to loss was $3.0 billion at both March 31, 2016, and December 31, 2015. The fair values of the contracts reflect the probability of whether the Firm will be required to perform under the contract. The fair value related to derivatives that the Firm deems to be guarantees were derivative payables of $212 million and $236 million at March 31, 2016, and December 31, 2015, respectively, and derivative receivables of $14 million at both March 31, 2016, and December 31, 2015. The Firm reduces exposures to these contracts by entering into offsetting transactions, or by entering into contracts that hedge the market risk related to the derivative guarantees.

In addition to derivative contracts that meet the characteristics of a guarantee, the Firm is both a purchaser and seller of credit protection in the credit derivatives market. For a further discussion of credit derivatives, see Note 5.

Loan sales- and securitization-related indemnifications

In connection with the Firm’s mortgage loan sale and securitization activities with GSEs and in certain private label transactions, the Firm has made representations and warranties that the loans sold meet certain requirements that may require the Firm to repurchase mortgage loans and/or indemnify the loan purchaser. Further, although the Firm’s securitizations are predominantly nonrecourse, the Firm does provide recourse servicing in certain limited cases where it agrees to share credit risk with the owner of the mortgage loans. For additional information, see Note 29 of JPMorgan Chase’s 2015 Annual Report.

The liability related to repurchase demands associated with private label securitizations is separately evaluated by the Firm in establishing its litigation reserves. For additional information regarding litigation, see Note 23 of this Form 10-Q and Note 31 of JPMorgan Chase’s 2015 Annual Report.

Other off-balance sheet arrangements

Guarantees of subsidiary

JPMorgan Chase Financial Company LLC (“JPMFC”), a direct, 100%-owned finance subsidiary of JPMorgan Chase & Co. (the “Parent Company”), was formed on September 30, 2015, for the purpose of issuing debt and other securities in offerings to investors. Any securities issued by JPMFC will be fully and unconditionally guaranteed by the Parent Company, and these guarantees will rank on a parity with the Firm’s unsecured and unsubordinated indebtedness. As of March 31, 2016, no securities had been issued by JPMFC.