10-K 1 corp10k2017.htm FORM 10-K Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended
 
Commission file
December 31, 2017
 
number 1-5805
JPMorgan Chase & Co.
(Exact name of registrant as specified in its charter)
Delaware
 
13-2624428
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
 
 
 
270 Park Avenue, New York, New York
 
10017
(Address of principal executive offices)
 
(Zip code)
 
 
 
Registrant’s telephone number, including area code: (212) 270-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common stock
 
The New York Stock Exchange
Warrants to purchase shares of Common Stock
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 5.45% Non-Cumulative Preferred Stock, Series P
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.70% Non-Cumulative Preferred Stock, Series T
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.30% Non-Cumulative Preferred Stock, Series W
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.125% Non-Cumulative Preferred Stock, Series Y
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.10% Non-Cumulative Preferred Stock, Series AA
 
The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.15% Non-Cumulative Preferred Stock, Series BB
 
The New York Stock Exchange
Alerian MLP Index ETNs due May 24, 2024
 
NYSE Arca, Inc.
Guarantee of Callable Step-Up Fixed Rate Notes due April 26, 2028 of JPMorgan Chase Financial Company LLC
 
The New York Stock Exchange
Guarantee of Cushing 30 MLP Index ETNs due June 15, 2037 of JPMorgan Chase Financial Company LLC
 
NYSE Arca, Inc.

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
x Large accelerated filer
o Accelerated filer
o Non-accelerated filer
(Do not check if a smaller reporting company)
o Smaller reporting company
o Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
The aggregate market value of JPMorgan Chase & Co. common stock held by non-affiliates as of June 30, 2017: $319,702,076,316
Number of shares of common stock outstanding as of January 31, 2018: 3,431,958,491
Documents incorporated by reference: Portions of the registrant’s Proxy Statement for the annual meeting of stockholders to be held on May 15, 2018, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.





Form 10-K Index
 
Page
1
 
1
 
1
 
1
 
1
 
278
 
38, 277, 278
 
290
 
99–116, 211–230,
291–296
 
117–119, 231–235,
297–298
 
248,299
 
300
8–26
26
27
27
27
 
 
 
 
 
28
28
28
28
28
29
29
29
 
 
 
 
 
30
31
31
31
31
 
 
 
 
 
32-35




Part I


Item 1. Business.
Overview
JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide; the Firm had $2.5 trillion in assets and $255.7 billion in stockholders’ equity as of December 31, 2017. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world’s most prominent corporate, institutional and government clients.
JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), a national banking association with U.S. branches in 23 states, and Chase Bank USA, National Association (“Chase Bank USA, N.A.”), a national banking association that is the Firm’s principal credit card-issuing bank. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities LLC (“JPMorgan Securities”), a U.S. broker-dealer. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Firm’s principal operating subsidiary in the U.K. is J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A.
The Firm’s website is www.jpmorganchase.com. JPMorgan Chase makes available free of charge, through its website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov. The Firm has adopted, and posted on its website, a Code of Conduct for all employees of the Firm and a Code of Ethics for its Chairman and Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and all other professionals of the Firm worldwide serving in a finance, accounting, tax or investor relations role.
Business segments
JPMorgan Chase’s activities are organized, for management reporting purposes, into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business is the Consumer & Community Banking (“CCB”) segment. The Firm’s wholesale business segments are Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”).
A description of the Firm’s business segments and the products and services they provide to their respective client bases is provided in the “Business segment results” section
 
of Management’s discussion and analysis of financial condition and results of operations (“MD&A”), beginning on page 40 and in Note 31.
Competition
JPMorgan Chase and its subsidiaries and affiliates operate in a highly competitive environment. Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other Internet-based companies, financial technology companies, and other companies engaged in providing similar products and services. The Firm’s businesses generally compete on the basis of the quality and variety of the Firm’s products and services, transaction execution, innovation, reputation and price. Competition also varies based on the types of clients, customers, industries and geographies served. With respect to some of its geographies and products, JPMorgan Chase competes globally; with respect to others, the Firm competes on a national or regional basis. The Firm’s ability to compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.
It is likely that competition in the financial services industry will continue to be intense as the Firm’s businesses compete with other financial institutions that may have a stronger local presence in certain geographies or that operate under different rules and regulatory regimes than the Firm, or with companies that provide new or innovative products or services that the Firm does not provide.
Supervision and regulation
The Firm is subject to extensive and comprehensive regulation under state and federal laws in the U.S., as well as the applicable laws of each of the various jurisdictions outside the U.S. in which the Firm does business.
The Firm has experienced an extended period of significant change in regulation which has had and could continue to have significant consequences for how the Firm conducts business in the U.S. and abroad. The Firm devotes substantial resources to complying with existing and new laws, rules and regulations, while, at the same time, endeavoring to best meet the needs and expectations of its customers, clients and shareholders. As a result of legislative and regulatory changes and expanded supervision, the Firm has implemented and refined policies, procedures and controls, and made adjustments to its business and operations, legal entity structure, and capital and liquidity management. The combined effect of numerous rule-makings by multiple governmental agencies and regulators, and the potential conflicts or inconsistencies among such rules, continue to present challenges and risks to the Firm’s business and operations.

 
 
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Part I

Because regulatory changes are ongoing, the Firm cannot currently quantify all of the possible effects on its business and operations of the significant changes that are underway. For more information, see Risk Factors on pages 8–26.
Financial holding company:
Consolidated supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As a bank holding company (“BHC”) and a financial holding company, JPMorgan Chase is subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve. The Federal Reserve acts as an “umbrella regulator” and certain of JPMorgan Chase’s subsidiaries are regulated directly by additional regulatory authorities based on the particular activities of those subsidiaries. For example, JPMorgan Chase’s national bank subsidiaries, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., are subject to supervision and regulation by the Office of the Comptroller of the Currency (“OCC”) and, with respect to certain matters, by the Federal Reserve and the Federal Deposit Insurance Corporation (the “FDIC”). Certain non-bank subsidiaries, such as the Firm’s U.S. broker-dealers, are subject to supervision and regulation by the SEC, and subsidiaries of the Firm that engage in certain futures-related and swaps-related activities are subject to supervision and regulation by the Commodity Futures Trading Commission (“CFTC”). J.P. Morgan Securities plc, is a U.K. bank licensed within the European Economic Area (the “EEA”) to undertake all banking activity and is regulated by the U.K. Prudential Regulation Authority (the “PRA”), a subsidiary of the Bank of England which has responsibility for prudential regulation of banks and other systemically important institutions, and by the U.K. Financial Conduct Authority (“FCA”), which regulates conduct matters for all market participants. The Firm’s other non-U.S. subsidiaries are regulated by the banking and securities regulatory authorities in the countries in which they operate. See Securities and broker-dealer regulation, Investment management regulation and Derivatives regulation below. In addition, the Firm’s consumer activities are subject to supervision and regulation by the Consumer Financial Protection Bureau (“CFPB”) and to regulation under various state statutes which are enforced by the respective state’s Attorney General.
Scope of permissible business activities. The Bank Holding Company Act generally restricts BHCs from engaging in business activities other than the business of banking and certain closely-related activities. Financial holding companies generally can engage in a broader range of financial activities than are otherwise permissible for BHCs, including underwriting, dealing and making markets in securities, and making merchant banking investments in non-financial companies. The Federal Reserve has the authority to limit a financial holding company’s ability to conduct otherwise permissible activities if the financial holding company or any of its depository institution subsidiaries ceases to meet the applicable eligibility
 
requirements (including requirements that the financial holding company and each of its U.S. depository institution subsidiaries maintain their status as “well-capitalized” and “well-managed”). The Federal Reserve may also impose corrective capital and/or managerial requirements on the financial holding company and may, for example, require divestiture of the holding company’s depository institutions if the deficiencies persist. Federal regulations also provide that if any depository institution controlled by a financial holding company fails to maintain a satisfactory rating under the Community Reinvestment Act, the Federal Reserve must prohibit the financial holding company and its subsidiaries from engaging in any activities other than those permissible for bank holding companies. In addition, a financial holding company must obtain Federal Reserve approval before engaging in certain banking and other financial activities both in the U.S. and internationally, as further described under Regulation of acquisitions below.
Activities restrictions under the Volcker Rule. Section 619 (the “Volcker Rule”) of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) prohibits banking entities, including the Firm, from engaging in certain “proprietary trading” activities, subject to exceptions for underwriting, market-making, risk-mitigating hedging and certain other activities. In addition, the Volcker Rule limits the sponsorship of, and investment in, “covered funds” (as defined by the Volcker Rule) and imposes limits on certain transactions between the Firm and its sponsored funds (see JPMorgan Chase’s subsidiary banks — Restrictions on transactions with affiliates below). The period during which banking entities were required to bring covered funds into conformance with the Volcker Rule ended on July 21, 2017. The Volcker Rule requires banking entities to establish comprehensive compliance programs reasonably designed to help ensure and monitor compliance with the restrictions under the Volcker Rule, including, in order to distinguish permissible from impermissible risk-taking activities, the measurement, monitoring and reporting of certain key metrics.
Capital and liquidity requirements. The Federal Reserve establishes capital and leverage requirements for the Firm and evaluates its compliance with such requirements. The OCC establishes similar capital and leverage requirements for the Firm’s national banking subsidiaries. For more information about the applicable requirements relating to risk-based capital and leverage, see Capital Risk Management on pages 82–91 and Note 26. Under Basel III, bank holding companies and banks are required to measure their liquidity against two specific liquidity tests: the liquidity coverage ratio (“LCR”) and the net stable funding ratio (“NSFR”). In the U.S., the final LCR rule (“U.S. LCR”) became effective on January 1, 2015. In April 2016, the U.S. banking regulators issued a proposed rule for NSFR, but no final rule has been issued. For additional information on LCR, see Liquidity Risk Management on pages 92–97. On December 19, 2016, the Federal Reserve published final U.S. LCR public disclosure requirements. Beginning in the second quarter of 2017, the Firm began disclosing its

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consolidated LCR pursuant to the U.S. LCR rule. On September 8, 2016, the Federal Reserve published the framework that will apply to the setting of the countercyclical capital buffer. The Federal Reserve reviews the amount of this buffer at least annually, and on December 1, 2017, the Federal Reserve reaffirmed setting this buffer at 0%. Banking supervisors globally continue to consider refinements and enhancements to the Basel III capital framework for financial institutions. On December 7, 2017, the Basel Committee issued Basel III: Finalizing post-crisis reforms (“Basel III Reforms”), which seeks to reduce excessive variability in RWA and converge capital requirements between Standardized and Advanced approaches. The Basel III Reforms include revisions to both the standardized and internal ratings-based approach for credit risk, streamlining of the available approaches under the credit valuation adjustment (“CVA”) framework, a revised approach for operational risk, revisions to the measurement and calibration of the leverage ratio, and a capital floor based on 72.5% of the revised Standardized approaches. The Basel Committee expects national regulatory authorities to implement the Basel III Reforms in the laws of their respective jurisdictions and to require banking organizations subject to such laws to meet most of the revised requirements by January 1, 2022, with certain elements being phased in through January 1, 2027. U.S. banking regulators will now propose requirements applicable to U.S. financial institutions.
Stress tests. The Federal Reserve has adopted supervisory stress tests for large bank holding companies, including JPMorgan Chase, which form part of the Federal Reserve’s annual Comprehensive Capital Analysis and Review (“CCAR”) framework. Under the framework, the Firm must conduct semi-annual company-run stress tests and, in addition, must submit an annual capital plan to the Federal Reserve, taking into account the results of separate stress tests designed by the Firm and the Federal Reserve. In reviewing the Firm’s capital plan, the Federal Reserve considers both quantitative and qualitative factors. Qualitative assessments include, among other things, the comprehensiveness of the plan, the assumptions and analysis underlying the plan, and the extent to which the Firm has satisfied certain supervisory matters related to the Firm’s processes and analyses, including the design and operational effectiveness of the controls governing such processes. Moreover, the Firm is required to receive a notice of non-objection from the Federal Reserve before taking capital actions, such as paying dividends, implementing common equity repurchase programs or redeeming or repurchasing capital instruments. The OCC requires JPMorgan Chase Bank, N.A. to perform separate, similar annual stress tests. The Firm publishes each year the results of its mid-cycle stress tests under the Firm’s internally-developed “severely adverse” scenario and the results of its (and its two primary subsidiary banks’) annual stress tests under the supervisory “severely adverse” scenarios provided by the Federal Reserve and the OCC. The Firm is required to file its 2018 annual CCAR submission on April 5,
 
2018. Results will be published by the Federal Reserve by June 30, 2018, with disclosures of results by BHCs, including the Firm, to follow within 15 days. The mid-cycle capital stress test submissions are due on October 5, 2018 and BHCs, including the Firm, will publish results by November 4, 2018. For additional information on the Firm’s CCAR, see Capital Risk Management on pages 82–91. In December 2017, the Federal Reserve released a set of proposals intended to provide more detailed disclosure and transparency concerning the Federal Reserve’s approach, design and governance of the supervisory stress testing process. The proposals were open for public comment through January 22, 2018.
Enhanced prudential standards. The Financial Stability Oversight Council (“FSOC”), among other things, recommends prudential standards and reporting and disclosure requirements to the Federal Reserve for systemically important financial institutions (“SIFIs”), such as JPMorgan Chase. The Federal Reserve has adopted several rules to implement the heightened prudential standards, including final rules relating to risk management and corporate governance of subject BHCs. BHCs with $50 billion or more in total consolidated assets are required to comply with enhanced liquidity and overall risk management standards, and their boards of directors are required to conduct appropriate oversight of their risk management activities. For information on liquidity measures, see Liquidity Risk Management on pages 92–97.
Orderly liquidation authority and resolution and recovery. As a BHC with assets of $50 billion or more, the Firm is required to submit periodically to the Federal Reserve and the FDIC a plan for resolution under the Bankruptcy Code in the event of material distress or failure (a “resolution plan”). On December 19, 2017, the Federal Reserve and the FDIC announced joint determinations on the 2017 resolution plans of eight systemically important domestic banking institutions, including that of JPMorgan Chase, and extended the filing deadline for the next resolution plan for each of these entities until July 1, 2019. The agencies determined that JPMorgan Chase’s 2017 resolution plan did not have any “deficiencies,” which are weaknesses severe enough to trigger a resubmission process that could result in more stringent requirements, or any “shortcomings,” which are less-severe weaknesses that would need to be addressed in the next resolution plan. For more information about the Firm’s resolution plan, see Risk Factors on pages 8–26.
Certain financial companies, including JPMorgan Chase and certain of its subsidiaries, can also be subjected to resolution under an “orderly liquidation authority.” The U.S. Treasury Secretary, in consultation with the President of the United States, must first make certain extraordinary financial distress and systemic risk determinations, and action must be recommended by the FDIC and the Federal Reserve. Absent such actions, the Firm, as a BHC, would remain subject to resolution under the Bankruptcy Code. In December 2013, the FDIC issued a draft policy statement

 
 
3

Part I

describing its “single point of entry” strategy for resolution of systemically important financial institutions under the orderly liquidation authority. This strategy seeks to keep operating subsidiaries of the BHC open and impose losses on shareholders and creditors of the holding company in receivership according to their statutory order of priority. For further information see Risk Factors on pages 8–26.
The FDIC also requires each insured depository institution (“IDI”) with $50 billion or more in assets, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., to provide an IDI resolution plan.
The Firm has a comprehensive recovery plan detailing the actions it would take to avoid failure by remaining well-capitalized and well-funded in the case of an adverse event. JPMorgan Chase has provided the Federal Reserve with comprehensive confidential supervisory information and analyses about the Firm’s businesses, legal entities and corporate governance and about its crisis management governance, capabilities and available alternatives to generate liquidity and capital in severe market circumstances. The OCC has published guidelines establishing standards for recovery planning by insured national banks, and JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. have submitted their recovery plans to the OCC. In addition, certain of the Firm’s non-U.S. subsidiaries are subject to resolution and recovery planning requirements in the jurisdictions in which they operate.
Regulators in the U.S. and abroad have proposed and implemented measures designed to address the possibility or perception that large financial institutions, including the Firm, may be “too big to fail,” and to provide safeguards so that, if a large financial institution does fail, it can be resolved without the use of public funds. Higher capital surcharges on global systemically important banks (“GSIBs”), requirements for certain large bank holding companies to maintain a minimum amount of long-term debt to facilitate orderly resolution of those firms (referred to as Total Loss Absorbing Capacity (“TLAC”)), and the International Swaps and Derivatives Association (“ISDA”) protocol relating to the “close-out” of derivatives transactions during the resolution of a large cross-border financial institution, are examples of initiatives to address “too big to fail.” For further information on the GSIB framework and TLAC, see Capital Risk Management on pages 82–91 and Risk Factors on pages 8–26, and on the ISDA close-out protocol, see Derivatives regulation below.
Holding company as source of strength for bank subsidiaries. JPMorgan Chase & Co. is required to serve as a source of financial strength for its depository institution subsidiaries and to commit resources to support those subsidiaries. This support may be required by the Federal Reserve at times when the Firm might otherwise determine not to provide it.
Regulation of acquisitions. Acquisitions by bank holding companies and their banks are subject to multiple requirements by the Federal Reserve and the OCC. For example, financial holding companies and bank holding companies are required to obtain the approval of the
 
Federal Reserve before they may acquire more than 5% of the voting shares of an unaffiliated bank. In addition, acquisitions by financial companies are prohibited if, as a result of the acquisition, the total liabilities of the financial company would exceed 10% of the total liabilities of all financial companies. In addition, for certain acquisitions, the Firm must provide written notice to the Federal Reserve prior to acquiring direct or indirect ownership or control of any voting shares of any company with over $10 billion in assets that is engaged in activities that are “financial in nature.”
JPMorgan Chase’s subsidiary banks:
The Firm’s two principal subsidiary banks, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., are FDIC-insured national banks regulated by the OCC. As national banks, the activities of JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. are limited to those specifically authorized under the National Bank Act and related interpretations by the OCC.
FDIC deposit insurance. The FDIC deposit insurance fund provides insurance coverage for certain deposits and is funded through assessments on banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. Changes in the methodology used to calculate such assessments, resulting from the enactment of the Dodd-Frank Act, significantly increased the assessments that the Firm’s bank subsidiaries pay annually to the FDIC. The FDIC instituted a new assessment surcharge on insured depository institutions with total consolidated assets greater than $10 billion in order to raise the reserve ratio for the FDIC deposit insurance fund.
FDIC powers upon a bank insolvency. Upon the insolvency of an insured depository institution, such as JPMorgan Chase Bank, N.A., the FDIC could be appointed as the conservator or receiver under the Federal Deposit Insurance Act (“FDIA”). The FDIC has broad powers to transfer any assets and liabilities without the approval of the institution’s creditors.
Cross-guarantee. An FDIC-insured depository institution can be held liable for any loss incurred or expected to be incurred by the FDIC if another FDIC-insured institution that is under common control with such institution is in default or is deemed to be “in danger of default” (commonly referred to as “cross-guarantee” liability). An FDIC cross-guarantee claim against a depository institution is generally superior in right of payment to claims of the holding company and its affiliates against such depository institution.
Prompt corrective action and early remediation. The Federal Deposit Insurance Corporation Improvement Act of 1991 requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depository institution if that institution does not meet certain capital adequacy standards. While these regulations apply only to banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., the Federal Reserve is authorized to take appropriate action against the parent BHC, such as

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JPMorgan Chase & Co., based on the undercapitalized status of any bank subsidiary. In certain instances, the BHC would be required to guarantee the performance of the capital restoration plan for its undercapitalized subsidiary.
OCC Heightened Standards. The OCC has established guidelines setting forth heightened standards for large banks. The guidelines establish minimum standards for the design and implementation of a risk governance framework for banks. While the bank can use certain components of the parent company’s risk governance framework, the framework must ensure that the bank’s risk profile is easily distinguished and separate from the parent for risk management purposes. The bank’s board or risk committee is responsible for approving the bank’s risk governance framework, providing active oversight of the bank’s risk-taking activities, and holding management accountable for adhering to the risk governance framework.
Restrictions on transactions with affiliates. The bank subsidiaries of JPMorgan Chase (including subsidiaries of those banks) are subject to certain restrictions imposed by federal law on extensions of credit to, investments in stock or securities of, and derivatives, securities lending and certain other transactions with, JPMorgan Chase & Co. and certain other affiliates. These restrictions prevent JPMorgan Chase & Co. and other affiliates from borrowing from such subsidiaries unless the loans are secured in specified amounts and comply with certain other requirements. For more information, see Note 25. In addition, the Volcker Rule imposes a prohibition on such transactions between any JPMorgan Chase entity and covered funds for which a JPMorgan Chase entity serves as the investment manager, investment advisor, commodity trading advisor or sponsor, as well as, subject to a limited exception, any covered fund controlled by such funds.
Dividend restrictions. Federal law imposes limitations on the payment of dividends by national banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. See Note 25 for the amount of dividends that the Firm’s principal bank subsidiaries could pay, at January 1, 2018, to their respective bank holding companies without the approval of their banking regulators.
In addition to the dividend restrictions described above, the OCC and the Federal Reserve have authority to prohibit or limit the payment of dividends of the bank subsidiaries they supervise, if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the bank.
Depositor preference. Under federal law, the claims of a receiver of an insured depository institution for administrative expense and the claims of holders of U.S. deposit liabilities (including the FDIC and deposits in non-U.S. branches that are dually payable in the U.S. and in a non-U.S. branch) have priority over the claims of other unsecured creditors of the institution, including public noteholders and depositors in non-U.S. branches. As a result, such persons could receive substantially less than the depositors in U.S. offices of the depository institution.
 
CFPB regulation and supervision, and other consumer regulations. JPMorgan Chase and its national bank subsidiaries, including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., are subject to supervision and regulation by the CFPB with respect to federal consumer protection laws, including laws relating to fair lending and the prohibition of unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products and services. These laws include the Truth-in-Lending, Equal Credit Opportunity Act (“ECOA”), Fair Credit Reporting, Fair Debt Collection Practice, Electronic Funds Transfer, Credit Card Accountability, Responsibility and Disclosure (“CARD”) and Home Mortgage Disclosure Acts. The CFPB has authority to impose new disclosure requirements for certain consumer financial products and services. The CFPB’s rule-making efforts have addressed mortgage-related topics, including ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements, appraisal and escrow standards and requirements for higher-priced mortgages. The CFPB continues to issue informal guidance on a variety of topics (such as the collection of consumer debts and credit card marketing practices). Other areas of focus include sales incentives, pre-authorized electronic funds transfers, “add-on” products, matters involving consumer populations considered vulnerable by the CFPB, credit reporting, and the furnishing of credit scores to individuals. As part of its regulatory oversight, the CFPB has authority to take enforcement actions against firms that offer certain products and services to consumers, including JPMorgan Chase.
Securities and broker-dealer regulation:
The Firm conducts securities underwriting, dealing and brokerage activities in the U.S. through J.P. Morgan Securities LLC and other non-bank broker-dealer subsidiaries, all of which are subject to regulations of the SEC, the Financial Industry Regulatory Authority and the New York Stock Exchange, among others. The Firm conducts similar securities activities outside the U.S. subject to local regulatory requirements. In the U.K., those activities are conducted by J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A., and are regulated by the PRA and the FCA. Broker-dealers are subject to laws and regulations covering all aspects of the securities business, including sales and trading practices, securities offerings, publication of research reports, use of customers’ funds, the financing of clients’ purchases, capital structure, record-keeping and retention, and the conduct of their directors, officers and employees. For information on the net capital of J.P. Morgan Securities LLC, and the applicable requirements relating to risk-based capital for J.P. Morgan Securities plc, see Broker-dealer regulatory capital on page 91. In addition, rules adopted by the U.S. Department of Labor (“DOL”) have imposed (among other things) a new standard of care applicable to broker-dealers when dealing

 
 
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Part I

with customers. For more information see Investment management regulation below.
Investment management regulation:
The Firm’s asset and wealth management businesses are subject to significant regulation in numerous jurisdictions around the world relating to, among other things, the safeguarding and management of client assets, offerings of funds and marketing activities. Certain of the Firm’s subsidiaries are registered with, and subject to oversight by, the SEC as investment advisers. As such, the Firm’s registered investment advisers are subject to the fiduciary and other obligations imposed under the Investment Advisers Act of 1940 and the rules and regulations promulgated thereunder, as well as various state securities laws. For information regarding investigations and litigation in connection with disclosures to clients related to proprietary products, see Note 29.
The Firm’s asset and wealth management businesses continue to be affected by ongoing rule-making and implementation of new regulations. The DOL’s fiduciary rule, which became effective June 9, 2017, has significantly expanded the universe of persons viewed as investment advice fiduciaries to retirement plans and individual retirement accounts (“IRAs”) under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The prohibited transaction exemptions issued in connection with the rule require adherence to “impartial conduct standards” (including a requirement to act in the “best interest” of retirement clients), although compliance with requirements relating to conditions requiring new client contracts, implementation of policies and procedures, websites and other disclosures to both investors and the DOL have been delayed until July 1, 2019. Furthermore, the DOL is performing a review of the rule and the related exemptions in accordance with a February 2017 memorandum from the President. Subject to the outcome of the DOL’s review, it is expected that the rule and related prohibited transaction exemptions will have a significant impact on the fee and compensation practices at financial institutions that offer investment advice to retail retirement clients. In addition to the impact of the DOL’s fiduciary rule, the Firm’s asset and wealth management businesses may be affected by ongoing rule-making and implementation of new regulations by the SEC and certain U.S. states relating to enhanced standards of conduct for broker-dealers and certain other market participants.
In the European Union (“EU”), substantial revisions to the Markets in Financial Instruments Directive (“MiFID II”) became effective across EU member states beginning January 3, 2018. These revisions introduced expanded requirements for a broad range of investment management activities, including product governance, transparency on costs and charges, independent investment advice, inducements, record keeping and client reporting. In addition, final regulations on European Money Market Fund Reform were published in July 2017 and, following an 18-month transition period for existing funds, will implement
 
new requirements to enhance the liquidity and stability of money market funds in the EU.
Derivatives regulation:
The Firm is subject to comprehensive regulation of its derivatives businesses. The regulations impose capital and margin requirements (including the collecting and posting of variation margin and initial margin in respect of non-centrally cleared derivatives), require central clearing of standardized over-the-counter (“OTC”) derivatives, require that certain standardized over-the-counter swaps be traded on regulated trading venues, and provide for reporting of certain mandated information. In addition, the Dodd-Frank Act requires the registration of “swap dealers” and “major swap participants” with the CFTC and of “security-based swap dealers” and “major security-based swap participants” with the SEC. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Securities plc and J.P. Morgan Ventures Energy Corporation have registered with the CFTC as swap dealers, and JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and J.P. Morgan Securities plc may be required to register with the SEC as security-based swap dealers. As a result of their registration as swap dealers or security-based swap dealers, these entities will be subject to a comprehensive regulatory framework applicable to their swap or security-based swap activities, which includes capital requirements, rules regulating their swap activities, rules requiring the collateralization of uncleared swaps, rules regarding segregation of counterparty collateral, business conduct and documentation standards, record-keeping and reporting obligations, and anti-fraud and anti-manipulation requirements. Further, some of the rules for derivatives apply extraterritorially to U.S. firms doing business with clients outside of the U.S., as well as to the overseas activities of non-U.S. subsidiaries of the Firm that either deal with U.S. persons or that are guaranteed by U.S. subsidiaries of the Firm; however, the full scope of the extra-territorial impact of the U.S. swaps regulation has not been finalized and therefore remains unclear. The effect of these rules may require banking entities, such as the Firm, to modify the structure of their derivatives businesses and face increased operational and regulatory costs. In the EU, the implementation of the European Market Infrastructure Regulation (“EMIR”) and MiFID II will result in comparable, but not identical, changes to the European regulatory regime for derivatives. The combined effect of the U.S. and EU requirements, and the potential conflicts and inconsistencies between them, present challenges and risks to the structure and operating model of the Firm’s derivatives businesses.
The Firm and other financial institutions have agreed to adhere to the 2015 Universal Resolution Stay Protocol (the “Protocol”) developed by ISDA in response to regulator concerns that the close-out of derivatives and other financial transactions during the resolution of a large cross-border financial institution could impede resolution efforts and potentially destabilize markets. The Protocol provides for the contractual recognition of cross-border stays under

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various statutory resolution regimes and a contractual stay on certain cross-default rights.
In the U.S., one subsidiary of the Firm, J.P. Morgan Securities LLC, is registered as a futures commission merchant, and other subsidiaries are either registered with the CFTC as commodity pool operators and commodity trading advisors or are exempt from such registration. These CFTC-registered subsidiaries are also members of the National Futures Association.
Data regulation:
The Firm and its subsidiaries are subject to federal, state and international laws and regulations concerning the use and protection of certain customer, employee and other personal and confidential information, including those imposed by the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act, as well as the EU Data Protection Directive. In addition, various U.S. regulators, including the Federal Reserve, the OCC and the SEC, have increased their focus on cybersecurity and data privacy through guidance, examinations and regulations.
In May 2018, the General Data Protection Regulation (“GDPR”) will replace the EU Data Protection Directive, and it will have a significant impact on how businesses can collect and process the personal data of EU individuals. In addition, numerous proposals regarding privacy and data protection are pending before U.S. and non-U.S. legislative and regulatory bodies.
The Bank Secrecy Act and Economic Sanctions:
The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA includes a variety of record-keeping and reporting requirements (such as cash transaction and suspicious activity reporting), as well as due diligence/know your customer documentation requirements. In January 2013, the Firm entered into Consent Orders with its banking regulators relating to the Firm’s Bank Secrecy Act/Anti-Money Laundering policies, procedures and controls; the Firm has taken significant steps to modify and enhance its processes and controls with respect to its Anti-Money Laundering procedures and to remediate the issues identified in the Consent Order. The Firm is also subject to the regulations and economic sanctions programs administered by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”).
Anti-Corruption:
The Firm is subject to laws and regulations relating to corrupt and illegal payments to government officials and others in the jurisdictions in which it operates, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. In November 2016, the Firm entered into a Consent Order with the Federal Reserve to resolve its investigation relating to a former hiring program for candidates referred by clients, potential clients and government officials in the Asia Pacific region. The Firm has taken significant steps to modify and enhance its processes and controls with respect
 
to the hiring of referred candidates and to remediate the issues identified in the Consent Order.
Compensation practices:
The Firm’s compensation practices are subject to oversight by the Federal Reserve, as well as other agencies. The Federal Reserve has issued guidance jointly with the FDIC and the OCC that is designed to ensure that incentive compensation paid by banking organizations does not encourage imprudent risk-taking that threatens the organizations’ safety and soundness. In addition, under the Dodd-Frank Act, federal regulators, including the Federal Reserve, must issue regulations or guidelines requiring covered financial institutions, including the Firm, to report the structure of all incentive-based compensation arrangements and prohibit incentive-based payment arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution. The Federal Reserve has conducted a review of the incentive compensation policies and practices of a number of large banking institutions, including the Firm. The Financial Stability Board has established standards covering compensation principles for banks. In addition, the SEC has issued regulations that will require public companies to start disclosing, beginning with annual shareholder meetings in 2018, the pay ratio between the company’s median employee and the company’s chief executive officer or other principal executive officer in the proxy statement as of December 31, 2017. The Firm’s compensation practices are also subject to regulation and oversight by local regulators in other jurisdictions. In Europe, the Fourth Capital Requirements Directive (“CRD IV”) includes compensation provisions and the European Banking Authority has instituted guidelines on compensation policies which in certain countries, such as the U.K., are implemented or supplemented by further local regulations or guidelines. The implementation of the Federal Reserve’s and other banking regulators’ guidelines regarding compensation are expected to evolve over the next several years, and may affect the manner in which the Firm structures its compensation programs and practices.
Significant international regulatory initiatives:
In the EU, there is an extensive and complex program of final and proposed regulatory enhancement that reflects, in part, the EU’s commitments to policies of the Group of Twenty Finance Ministers and Central Bank Governors (“G20”) together with other plans specific to the EU. The EU operates a European Systemic Risk Board that monitors financial stability, together with European Supervisory Authorities (“ESA”) that set detailed regulatory rules and encourage supervisory convergence across the EU’s Member States. The EU is currently reviewing the ESA framework. The EU has also created a Single Supervisory Mechanism for the euro-zone, under which the regulation of all banks in that zone will be under the auspices of the European Central Bank, together with a Single Resolution Mechanism and Single Resolution Board, having jurisdiction over bank resolution in the zone. At both the G20 and EU

 
 
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levels, various proposals are under consideration to address risks associated with global financial institutions.
In the EU, this includes EMIR, which requires, among other things, the central clearing of certain standardized derivatives and risk mitigation for uncleared OTC derivatives, and MiFID II, which gives effect to the G20 commitment to move trading of standardized OTC derivatives to exchanges or electronic trading platforms. MiFID II significantly enhances requirements for pre- and post-trade transparency, transaction reporting and investor protection. MiFID II also introduces a commodities position limits and reporting regime. EMIR became effective in 2012, although some requirements apply on a phased basis and certain aspects of the regulation are currently being reviewed. MiFID II became effective across EU Member States on January 3, 2018, after a one-year delay.
The EU is also currently considering or implementing significant revisions to laws covering securities settlement; mutual funds and pensions; payments; anti-money laundering controls; data security and privacy; transparency and disclosure of securities financing transactions; benchmarks; resolution of banks, investment firms and market infrastructures; and capital and liquidity requirements for banks and investment firms. The capital and liquidity legislation for banks and investment firms will implement in the EU many of the finalized Basel III capital and liquidity standards, including in relation to the leverage ratio, market risk capital, and a net stable funding ratio. The legislation also proposes an intermediate parent undertaking (“IPU”) requirement for foreign banks, which will require non-EU banks operating in Europe (with total EU assets greater than EUR30 billion or which are part of a GSIB) to establish a single EU-located IPU. The full impact of the proposal on JPM’s EU operations and legal entities will be heavily influenced by the outcome of the EU legislative process, including whether any flexibility is introduced to the requirement.
Consistent with the G20 and EU policy frameworks, U.K. regulators have adopted a range of policy measures that have significantly changed the markets and prudential regulatory environment in the U.K. In addition, U.K. regulators have introduced measures to enhance accountability of individuals, and promote forward-looking conduct risk identification and mitigation, including by introducing the Senior Managers and Certification Regimes.
On June 23, 2016, the U.K. voted by referendum to leave the European Union. The U.K. government invoked Article 50 of the Lisbon Treaty on March 29, 2017, starting a two-year period for the formal exit negotiations. This means that the U.K. will leave the EU on March 29, 2019 unless the timeline is unanimously extended by the remaining 27 EU Member States (“EU27”) and the U.K. In December 2017, the EU27 agreed that “sufficient progress” had been made on the terms of the U.K.’s withdrawal to allow parallel talks on the future relationship, which are expected to begin in March 2018. The U.K.’s priorities in negotiating the future relationship are to seek a bilateral free trade agreement
 
with the EU27 that facilitates the “greatest possible access” to the Single Market. However, the U.K. will not seek to continue its membership in the Single Market. The current EU27 position is that a free trade agreement should be balanced, ambitious and wide-ranging, that the U.K.’s participation in the Single Market or parts thereof must end, and that there will not be any sector-specific carve-outs, such as for financial services. Both the EU27 and the U.K. are open to the idea of a “transitional arrangement.” The U.K.’s departure from the EU will have a significant impact across the Firm’s European businesses, including business and legal entity reorganization, and may lead to direct and indirect changes to EU27 and U.K. regulatory approaches. The situation remains highly uncertain, particularly in relation to whether a transition period is implemented and whether financial services will be included in any future free trade agreement.
Item 1A. Risk Factors.
The following discussion sets forth the material risk factors that could affect JPMorgan Chase’s financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm.
Regulatory
JPMorgan Chase’s businesses are highly regulated, and the laws and regulations that apply to JPMorgan Chase have a significant impact on its operations.
JPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws and regulations that apply to its operations in all of the jurisdictions around the world in which it does business. The regulation of financial services activities is typically extensive and comprehensive.
In recent years, legislators and regulators adopted a wide range of new laws and regulations affecting the financial services industry, both within and outside the U.S. The supervision of financial services firms also expanded significantly during this period. The wave of increased regulation and supervision of JPMorgan Chase has affected the way that it conducts and structures its operations. Existing and new laws and regulations and expanded supervision could require JPMorgan Chase to make further changes to its operations. These changes could result in JPMorgan Chase incurring additional costs for complying with laws and regulations or losing a significant amount of revenue, and could reduce JPMorgan Chase’s profitability. More specifically, existing and new laws and regulations could require JPMorgan Chase to:
limit the products and services that it offers
reduce the liquidity that it can provide through its market-making activities
stop or discourage it from engaging in business opportunities that it might otherwise pursue
recognize losses in the value of assets that it holds

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pay higher assessments, levies or other governmental charges
dispose of certain assets, and do so at times or prices that are disadvantageous
impose restrictions on certain business activities, or
increase the prices that it charges for products and services, which could reduce the demand for them.
Differences in financial services regulation can be disadvantageous for JPMorgan Chase’s business.
The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, or other criteria. For example:
larger firms are often subject to more stringent supervision and regulation
financial technology companies and other competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or
the financial services regulatory framework in a particular jurisdiction may favor financial institutions that are based in that country.
There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in different countries and regions in which JPMorgan Chase does business. For example, legislative and regulatory initiatives within the EU could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in that region in order to comply with those requirements. These include laws and regulations that have been adopted or proposed relating to:
the resolution of financial institutions
the establishment by non-EU financial institutions of intermediate holding companies in the EU
the separation of trading activities from core banking services
mandatory on-exchange trading
position limits and reporting rules for derivatives
governance and accountability regimes
conduct of business requirements, and
restrictions on compensation.
These types of differences in financial services regulation, or inconsistencies or conflicts between laws and regulations between different jurisdictions, could require JPMorgan Chase to, among other things:
 
divest assets or restructure its operations
absorb increased operational, capital and liquidity costs
change the prices that it charges for its products and services
curtail the products and services that it offers to its customers and clients, or
incur higher costs for complying with different legal and regulatory frameworks.
Any or all of these factors could harm JPMorgan Chase’s ability to compete against other firms that are not subject to the same laws and regulations or supervisory oversight, or harm JPMorgan Chase’s businesses, results of operations and profitability.
Governments in some countries in which JPMorgan Chase does business have adopted laws or regulations which require that JPMorgan Chase subsidiaries which operate in those countries maintain minimum amounts of capital or liquidity on a stand-alone basis. Some regulators outside the U.S. have also proposed that large banks which conduct certain businesses in their jurisdictions operate through separate subsidiaries located in those countries. These requirements, and any future laws or regulations that impose restrictions on the way JPMorgan Chase organizes its businesses or increase the capital or liquidity requirements that would apply to JPMorgan Chase subsidiaries, could hinder JPMorgan Chase’s ability to efficiently manage its operations, increase its funding and liquidity costs, and result in lower profitability.
Heightened regulatory scrutiny of JPMorgan Chase’s businesses has increased its compliance costs and could result in restrictions on its operations.
JPMorgan Chase’s operations are subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions where JPMorgan Chase does business. JPMorgan Chase has paid significant fines or provided other monetary relief in connection with resolving several investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory settlements or other actions in the future, and addressing the requirements of any such settlement could result in JPMorgan Chase incurring higher operational and compliance costs.
In connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the settlement. These types of admissions can lead to:
greater exposure in civil litigation
damage to reputation
disqualification from doing business with certain clients or customers, or in specific jurisdictions, or

 
 
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other direct and indirect adverse effects.
Furthermore, U.S. government officials have demonstrated a willingness to bring criminal actions against financial institutions and have increasingly demanded that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. In the case of JPMorgan Chase, these resolutions have included:
JPMorgan Chase’s agreement in May 2015 to plead guilty to a single violation of federal antitrust law in connection with its settlements with certain government authorities relating to its foreign exchange sales and trading activities and controls related to those activities, and
the non-prosecution agreement entered into by a subsidiary of JPMorgan Chase with the U.S. Department of Justice in November 2016 in connection with settlements to resolve various governmental investigations relating to a former hiring program for candidates referred by clients, potential clients and government officials in the Asia Pacific region.
Resolutions of this type can have significant collateral consequences for the subject financial institution, including loss of clients, customers and business, the inability to offer certain products or services, or losing permission to operate certain businesses, either temporarily or permanently.
JPMorgan Chase expects that it and other financial services firms will continue to be subject to expanded regulatory scrutiny and governmental investigations and enforcement actions. JPMorgan Chase also expects that regulators will continue to insist that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions. Furthermore, if JPMorgan Chase fails to meet the requirements of any governmental settlements and other actions to which it is subject, or to maintain risk and control processes that meet the heightened standards established by its regulators, it could be required to, among other things:
enter into further orders and settlements
pay additional regulatory fines, penalties or judgments, or
accept material regulatory restrictions on, or changes in the management of, its businesses.
The extent of JPMorgan Chase’s exposure to legal and regulatory matters can be unpredictable and could, in some cases, exceed the amount of reserves that JPMorgan Chase has established for those matters.
Requirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses.
JPMorgan Chase is required under the Dodd-Frank Act and Federal Reserve and FDIC rules to prepare and submit
 
periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy without extraordinary government support, in the event of material financial distress or failure. The agencies’ evaluation of the Firm’s resolution plan may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase making changes to its legal entity structure or to certain internal or external activities that could increase funding or operational costs.
If the Federal Reserve and the FDIC were to determine that a future resolution plan submitted by JPMorgan Chase has deficiencies, they could jointly impose more stringent capital, leverage or liquidity requirements or restrictions on JPMorgan Chase’s growth, activities or operations. After two years, if the deficiencies are not cured, the agencies could also require that JPMorgan Chase restructure, reorganize or divest assets or businesses in ways that could materially and adversely affect JPMorgan Chase’s operations and strategy.
Holders of JPMorgan Chase & Co.’s debt and equity securities will absorb losses if it were to enter into a resolution.
Federal Reserve rules require that JPMorgan Chase & Co. (the “holding company”) maintain minimum levels of unsecured external long-term debt and other loss-absorbing capacity with specific terms (“eligible LTD”) for purposes of recapitalizing JPMorgan Chase’s operating subsidiaries if the holding company were to enter into a resolution either:
in a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, or
in a receivership administered by the FDIC under Title II of the Dodd-Frank Act (“Title II”).
If the holding company were to enter into a resolution, holders of eligible LTD and other debt and equity securities of the holding company will absorb the losses of the holding company and its affiliates.
The preferred “single point of entry” strategy under JPMorgan Chase’s resolution plan contemplates that only the holding company would enter bankruptcy proceedings. JPMorgan Chase’s subsidiaries would be recapitalized as needed so that they could continue normal operations or subsequently be divested or wound down in an orderly manner. As a result, the holding company’s losses and any losses incurred by its subsidiaries would be imposed first on holders of the holding company’s equity securities and thereafter on its unsecured creditors, including holders of eligible LTD and other debt securities. Claims of holders of those securities would have a junior position to the claims of creditors of JPMorgan Chase’s subsidiaries and to the claims of priority (as determined by statute) and secured creditors of the holding company.
Accordingly, in a resolution of the holding company in bankruptcy, holders of eligible LTD and other debt securities of the holding company would realize value only to the

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extent available to the holding company as a shareholder of JPMorgan Chase Bank, N.A. and its other subsidiaries, and only after any claims of priority and secured creditors of the holding company have been fully repaid.
The FDIC has similarly indicated that a single point of entry recapitalization model could be a desirable strategy to resolve a systemically important financial institution, such as the holding company, under Title II. However, the FDIC has not, to date, formally adopted a single point of entry resolution strategy.
If the holding company were to enter into a resolution, none of the holding company, the Federal Reserve or the FDIC is obligated to follow JPMorgan Chase’s preferred strategy, and losses to holders of eligible LTD and other debt and equity securities of the holding company, under whatever strategy is ultimately followed, could be greater.
Political
Political developments can cause uncertainty concerning the regulatory environment in which JPMorgan Chase operates its businesses.
Recent elections and referendums in the U.S. and abroad have introduced uncertainty regarding the regulatory environment in which JPMorgan Chase and other financial services firms will operate in the future. For example, the U.K.’s planned departure from the EU has engendered significant uncertainty concerning the regulatory framework under which global financial services institutions, including JPMorgan Chase, will need to conduct their business in the U.K. and the EU. Depending on the nature of the arrangements agreed between the U.K. and the EU, including with respect to the ability of financial services companies to engage in business in the EU from legal entities organized in or operating from the U.K., JPMorgan Chase may need to make significant changes to its legal entity structure and operations and the locations in which it operates. These types of structural and operational changes could result in JPMorgan Chase needing to implement an operating model across its European legal entities that is less efficient or cost-effective.
The result of an election may suggest that the new administration will ease the regulatory requirements that apply to financial services firms. However, it is equally possible that the potential for reduced regulation does not occur or is reversed by another regulator or by a subsequent administration, or that deregulation measures that are ultimately enacted deliver significant competitive advantages to financial services firms that are structured differently or serve different markets than JPMorgan Chase. JPMorgan Chase cannot predict political developments of this nature, or whether they will have favorable or unfavorable long-term effects on its businesses.
Economic uncertainty caused by political developments can hurt JPMorgan Chase’s businesses.
The economic environment and market conditions in which JPMorgan Chase operates continue to be uncertain due to
 
recent political developments in the U.S. and abroad. Certain policy proposals, including isolationist foreign policies, protectionist trade policies or the possible withdrawal or reduction of government support for GSEs, could cause a contraction in U.S. and global economic growth and higher volatility in the financial markets. These types of political developments could, among other things:
erode investor confidence in the U.S. economy and financial markets
heighten concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time, and
undermine the status of the U.S. dollar as a safe haven currency.
These factors could lead to greater market volatility, large-scale sales of U.S. government debt and other U.S. debt and equity securities, the widening of credit spreads and other market dislocations. Any of these potential outcomes could cause JPMorgan Chase to suffer losses in its investment securities portfolio, reduce its capital levels, hamper its ability to deliver products and services to its clients and customers, and weaken its results of operations.
Political developments in other parts of the world have also led to uncertainty in global economic conditions, including:
concerns about the capabilities and intentions of the government of North Korea, and
regional hostilities, and political or social upheavals, in other parts of the world.
JPMorgan Chase’s results of operations can be adversely affected by the uncertainty arising from significant political developments and any market volatility or disruption that results from that uncertainty.
The positive impact of U.S. tax reform legislation on JPMorgan Chase may diminish over time.
The long-term impact of the tax reform legislation recently enacted in the U.S. on JPMorgan Chase and the U.S. economy is not yet known. While the tax reform will have a positive impact on JPMorgan Chase’s net income, the competitive environment and other factors will influence the extent to which these benefits are retained by JPMorgan Chase over the longer term. In addition, the specific impact on JPMorgan Chase’s businesses, products and geographies may vary.
Market
JPMorgan Chase’s businesses are materially affected by economic and market conditions.
JPMorgan Chase’s results of operations can be negatively affected by adverse changes in any of the following:
the liquidity in the U.S. and global financial markets
the level and volatility of market prices and rates, including those for debt and equity instruments,

 
 
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currencies, commodities, interest rates and other market indices
investor, consumer and business sentiment
events that reduce confidence in the financial markets
inflation and unemployment
the availability and cost of capital and credit
the economic effects of natural disasters, severe weather conditions, health emergencies or pandemics, cyberattacks, outbreaks of hostilities, terrorism or other geopolitical instabilities
monetary and fiscal policies and actions taken by governmental authorities, including the Federal Reserve and other central banks, and
the health of the U.S. and global economies.
JPMorgan Chase’s consumer businesses are particularly affected by U.S. domestic economic conditions, including:
U.S. interest rates
the rate of unemployment
housing prices
the level of consumer confidence
changes in consumer spending, and
the number of personal bankruptcies.
Sustained low growth in the U.S. economy could diminish customer demand for the products and services offered by JPMorgan Chase’s consumer businesses. It could also increase the cost to provide those products and services. Adverse economic conditions could also lead to an increase in delinquencies in mortgage, credit card, auto and other loans and higher net charge-offs, which can reduce JPMorgan Chase’s earnings. These consequences could be significantly worse in certain geographies where high levels of unemployment have resulted from declining industrial or manufacturing activity.
JPMorgan Chase’s earnings from its consumer businesses could also be adversely affected by changes in government policies that affect consumers, including those relating to medical insurance, immigration and employment status, as well as governmental policies aimed at the economy more broadly, such as infrastructure spending and global trade, which could result in, among other things, higher inflation or reductions in consumer disposable income.
In JPMorgan Chase’s wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwritings. Furthermore, if a significant and sustained
 
deterioration in market conditions were to occur, the profitability of JPMorgan Chase’s capital markets businesses could be reduced to the extent that those businesses:
earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to refinance their outstanding debt obligations in unfavorable market conditions
dispose of portions of credit commitments, such as loan syndications or securities underwritings, at a loss, or
hold larger residual positions in credit commitments that cannot be sold at favorable prices.
JPMorgan Chase’s investment securities portfolio and market-making positions can suffer losses due to adverse economic, market and political events and conditions.
JPMorgan Chase generally maintains positions in various fixed income instruments in its investment securities portfolio, and positions in various fixed income, currency, commodity, credit and equity instruments as part of its market-making activities. Market-making positions are intended to facilitate demand from JPMorgan Chase’s clients for these instruments and to provide liquidity for clients. The value of the positions that JPMorgan Chase holds can be significantly affected by factors such as:
JPMorgan Chase’s ability to effectively hedge market and other risks on its positions
volatility in interest rates and debt, equity and commodities markets
changes in interest rates and credit spreads, and
the availability of liquidity in the capital markets.
All of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions on market-making activities.
JPMorgan Chase’s investment securities portfolio and market-making businesses can also suffer losses due to unanticipated market events, including:
severe declines in asset values
unexpected credit events
unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa), or
other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.
If JPMorgan Chase experiences significant losses in its investment securities portfolio or from market-making activities, this could reduce JPMorgan Chase’s profitability and its capital levels, and thereby constrain the growth of its businesses.

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JPMorgan Chase’s asset and wealth management and custody businesses may earn lower fee revenue during adverse macroeconomic conditions.
The fees that JPMorgan Chase earns from managing third-party assets or holding assets in custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuations of the client assets that JPMorgan Chase manages or holds in custody, which, in turn, could affect JPMorgan Chase’s revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.
Changes in interest rates and credit spreads can adversely affect certain of JPMorgan Chase’s revenue and income streams.
JPMorgan Chase can generally be expected to earn higher net interest income when interest rates are high or increasing. However, higher interest rates can also lead to:
fewer originations of commercial and residential loans
lower returns on JPMorgan Chase’s investment securities portfolio, and
the loss of deposits to the extent that JPMorgan Chase makes incorrect assumptions about depositor behavior.
All of these outcomes could adversely affect JPMorgan Chase’s revenues and capital levels. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase’s consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans.
On the other hand, a low interest rate environment may cause JPMorgan Chase’s net interest margins to be compressed, which could reduce:
the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments, and
the value of JPMorgan Chase’s mortgage servicing rights (“MSRs”) asset, thereby reducing its net interest income and other revenues.
When credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase’s credit spreads
 
may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase’s credit spreads will affect, positively or negatively, JPMorgan Chase’s earnings on certain liabilities, such as derivatives, that are recorded at fair value.
High market volatility can impact JPMorgan Chase’s markets businesses.
While JPMorgan Chase’s markets businesses may earn higher flow revenue during periods of elevated market volatility, sudden and significant volatility in the prices of securities, loans, derivatives and other instruments can:

curtail the trading markets for those instruments
make it difficult to sell or hedge those instruments
increase JPMorgan Chase’s funding costs, or
adversely affect JPMorgan Chase’s profitability, capital or liquidity.
The Federal Reserve has observed that market volatility may be exacerbated by regulatory restrictions. It noted that market participants that are subject to the Volcker Rule are likely to decrease their market-making activities, and thereby constrain market liquidity, during periods of market stress. Furthermore, market participants that are not required to hold substantial amounts of capital may retreat more quickly from volatile markets, which could further reduce market liquidity.
In a difficult or less liquid market environment, JPMorgan Chase’s risk management strategies may not be effective because other market participants may be attempting to use the same or similar strategies. In these circumstances, it may be difficult for JPMorgan Chase to reduce its risk positions due to the activity of other market participants or widespread market dislocations.
Sustained volatility in the financial markets may also negatively affect consumer or investor confidence, which could lead to lower client activity and reduce JPMorgan Chase’s revenues.
Credit
JPMorgan Chase can be adversely affected by the financial condition of its clients, customers and counterparties.
JPMorgan Chase routinely executes transactions with brokers and dealers, commercial and investment banks, mutual and hedge funds, investment managers and other types of financial institutions. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation in the event that a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that it has appointed to

 
 
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provide custody services for assets of JPMorgan Chase’s clients becomes insolvent.
Disputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can also impair JPMorgan Chase’s ability to effectively manage its credit risk exposure from its market activities.
JPMorgan Chase’s markets businesses can be harmed by the insolvency of a significant market participant.
The failure of a significant market participant, or concerns about the creditworthiness of such a firm, can have a cascading effect within the financial markets. JPMorgan Chase’s markets businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting.
JPMorgan Chase’s clearing services business is exposed to the risk of client or counterparty default.
As part of its clearing services activities, JPMorgan Chase is a member of various central counterparty clearinghouses (“CCPs”). In the event that another member of such an organization defaults on its obligations to the CCP, JPMorgan Chase may be required to pay a portion of any losses incurred by the CCP as a result of that default. As a clearing member, JPMorgan Chase is also exposed to the risk of non-performance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client’s bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase’s operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses.
JPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.
During periods of market stress or illiquidity, JPMorgan Chase’s credit risk may be further increased when JPMorgan Chase cannot realize the fair value of the collateral held by it or when collateral is liquidated at prices that are not sufficient to recover the full amount of the loan, derivative or other exposure due to it. Furthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.
 
JPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.
JPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties:
engage in similar businesses
do business in the same geographic region, or
have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions.
For example, a significant deterioration in the credit quality of one of JPMorgan Chase’s borrowers or counterparties could lead to concerns about the creditworthiness of other borrowers or counterparties in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase’s credit and market risk exposure and potentially cause it to incur losses, including fair value losses in its trading businesses.
Similarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of JPMorgan Chase’s borrowers or counterparties not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase’s consumer businesses who live in those areas or work in those affected industries or related or dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its efforts to diversify or hedge its exposures against those risks may not be successful.
JPMorgan Chase’s consumer businesses can also be harmed by an excessive, industry-wide expansion of consumer credit. For example, heightened competition among financial institutions for certain types of consumer loans, including credit card, mortgage, auto or other loans, could prompt significant reductions in the pricing of those loans and thereby decrease their profitability, or result in loans being extended to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase’s consumer businesses may earn lower revenues in such an environment.
Disruptions in the liquidity or transparency of the financial markets could cause JPMorgan Chase to be unable to sell, syndicate or realize the value of its positions in various debt instruments, loans, derivatives and other obligations, and thereby lead to increased risk concentrations. If JPMorgan

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Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted assets (“RWA”) that JPMorgan Chase holds on its balance sheet. These factors could increase JPMorgan Chase’s capital requirements and funding costs and adversely affect the profitability of JPMorgan Chase’s businesses.
Liquidity
Liquidity is critical to JPMorgan Chase’s ability to fund and operate its businesses.
JPMorgan Chase’s liquidity could be impaired at any given time by factors such as:
market-wide illiquidity or disruption
unforeseen cash or capital requirements
inability to sell assets, or to sell assets at favorable times or prices
default by a CCP or other significant market participant
unanticipated outflows of cash or collateral, and
lack of market or customer confidence in JPMorgan Chase or financial institutions in general.
A diminution of JPMorgan Chase’s liquidity may be caused by events over which it has little or no control. For example, during the 2008-2009 financial crisis, periods of low investor confidence and significant market illiquidity resulted in higher funding costs for JPMorgan Chase and limited its access to some of its traditional sources of liquidity, including securitized debt issuances. There is no assurance that severe conditions of this type will not occur in the future.
JPMorgan Chase may need to raise funding from alternative sources if its access to stable and lower-cost sources of funding, such as bank deposits and borrowings from Federal Home Loan Banks, is reduced. Alternative sources of funding could be more expensive or limited in availability. JPMorgan Chase’s funding costs could also be negatively affected by actions that JPMorgan Chase may take in order to:
satisfy applicable liquidity coverage ratio and net stable funding ratio requirements
continue to satisfy requirements under the TLAC rules concerning the amount of eligible LTD that JPMorgan Chase must have outstanding
address obligations under its resolution plan, or
satisfy regulatory requirements in countries outside the U.S. relating to the pre-positioning of liquidity in subsidiaries that are material legal entities.
More generally, if JPMorgan Chase fails to effectively manage its liquidity, this could constrain its ability to fund or invest in its businesses, and thereby adversely affect its results of operations.
 
JPMorgan Chase & Co. is a holding company and depends on the cash flows of its subsidiaries to make payments on its outstanding securities.
JPMorgan Chase & Co. is a holding company that holds the stock of JPMorgan Chase Bank, N.A. and an intermediate holding company, JPMorgan Chase Holdings LLC (the “IHC”). The IHC in turn holds the stock of substantially all of JPMorgan Chase’s subsidiaries other than JPMorgan Chase Bank, N.A. and its subsidiaries. The IHC also owns other assets and intercompany indebtedness owing to the holding company.
The holding company is obligated to contribute to the IHC substantially all the net proceeds received from securities issuances (including issuances of senior and subordinated debt securities and of preferred and common stock).
The ability of JPMorgan Chase Bank, N.A. and the IHC to make payments to the holding company is also limited. JPMorgan Chase Bank, N.A. is subject to restrictions on its dividend distributions, as well as capital adequacy and liquidity requirements and other regulatory restrictions on its ability to make payments to the holding company. The IHC is prohibited from paying dividends or extending credit to the holding company if certain capital or liquidity “thresholds” are breached or if limits are otherwise imposed by JPMorgan Chase’s management or Board of Directors.
As a result of these arrangements, the ability of the holding company to make various payments is dependent on its receiving dividends from JPMorgan Chase Bank, N.A. and dividends and extensions of credit from the IHC. These limitations could affect the holding company’s ability to:
pay interest on its debt securities
pay dividends on its equity securities
redeem or repurchase outstanding securities, and
fulfill its other payment obligations.
Collectively, these regulatory restrictions and limitations could significantly limit the holding company’s ability to pay dividends and satisfy its debt and other obligations. They could also result in the holding company seeking protection under bankruptcy laws at a time earlier than would have been the case absent the existence of those thresholds.
Reductions in JPMorgan Chase’s credit ratings may adversely affect its liquidity and cost of funding.
JPMorgan Chase & Co. and certain of its principal subsidiaries are rated by credit rating agencies. Rating agencies evaluate both general and firm- and industry-specific factors when determining their credit ratings for a particular financial institution, including:
economic and geopolitical trends
regulatory developments
expected future profitability

 
 
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risk management practices
legal expenses
assumptions about government support, and
ratings differentials between bank holding companies and their bank and non-bank subsidiaries.
JPMorgan Chase closely monitors and manages, to the extent that it is able, factors that could influence its credit ratings. However, there is no assurance that JPMorgan Chase’s credit ratings will not be lowered in the future. Furthermore, any such downgrade could occur at times of broader market instability when JPMorgan Chase’s options for responding to events may be more limited and general investor confidence is low.
A reduction in JPMorgan Chase’s credit ratings could curtail JPMorgan Chase’s business activities and reduce its profitability in a number of ways, including by:
reducing access to capital markets
materially increasing the cost of issuing and servicing securities
triggering additional collateral or funding requirements, and
decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.
Any rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.
Regulation and reform of benchmarks could have adverse consequences on securities and other instruments that are linked to those benchmarks.
Interest rate, equity, foreign exchange rate and other types of indices which are deemed to be “benchmarks” are the subject of recent international, national and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences which cannot be fully anticipated.
Any of the international, national or other proposals for reform or the general increased regulatory scrutiny of benchmarks could also increase the costs and risks of administering or otherwise participating in the setting of benchmarks and complying with any such regulations or requirements. Such factors may have the effect of discouraging market participants from continuing to administer or contribute to certain benchmarks, trigger changes in the rules or methodologies used in certain benchmarks or lead to the disappearance of certain benchmarks.
 
On July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021.
Any of the these developments, and any future initiatives to regulate, reform or change the manner of administration of benchmarks, could result in adverse consequences to the return on, value of and market for securities and other instruments whose returns are linked to any such benchmark, including those issued by JPMorgan Chase or its subsidiaries.
Operational
JPMorgan Chase’s businesses are highly dependent on the effectiveness of its operational systems and those of other market participants.
JPMorgan Chase’s businesses rely comprehensively on the ability of JPMorgan Chase’s financial, accounting, trading, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately and quickly. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase’s operational systems depends on, among other things:
the quality of the information contained in those systems, as inaccurate, outdated or corrupted data can significantly compromise the functionality of a particular operational system and other systems to which it transmits information, and
JPMorgan Chase’s ability to appropriately maintain and upgrade its systems on a regular basis, and to ensure that any changes introduced to its systems are managed carefully to ensure operational continuity.
JPMorgan Chase also depends on its ability to access and use the operational systems of its vendors, custodians and other market participants, including clearing and payment systems, CCPs, securities exchanges and data processing, security and technology companies.
The ineffectiveness, failure or other disruption of the operational systems of JPMorgan Chase or another significant market participant, including due to a cyberbreach, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:
delays or other disruptions in providing information, services and liquidity to clients and customers
the inability to settle transactions or obtain access to funds and other assets

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the possibility that transactions such as funds transfers or capital markets trades are executed erroneously, illegally or with unintended consequences
financial losses, including possible restitution to clients and customers
higher operational costs associated with replacing services provided by a system that is unavailable
customer dissatisfaction and loss of confidence in JPMorgan Chase’s products and services, and
harm to reputation.
Furthermore, the interconnectivity of multiple financial institutions with central agents, CCPs, payment processors, securities exchanges, clearing houses and other financial market infrastructures, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could materially affect JPMorgan Chase’s ability to conduct business.
As the speed, frequency, volume and complexity of transactions increases, it becomes more challenging to effectively maintain JPMorgan Chase’s operational systems and infrastructure, especially due to the heightened risks that:
errors, whether inadvertent or malicious, cause widespread system disruption
isolated or seemingly insignificant errors in operational systems compound, or migrate to other systems over time, to become larger issues
failures in synchronization or encryption software, or degraded performance of microprocessors due to design flaws, causes disruptions in operational systems, or the inability of systems to communicate with each other, and
third parties attempt to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.
If JPMorgan Chase’s operational systems, or those of third parties on which JPMorgan Chase’s businesses depend, are unable to meet the demanding standards of JPMorgan Chase’s businesses and operations, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.
JPMorgan Chase relies on the skill and integrity of its employees and those of third parties in running its operational systems.
The effective functioning of JPMorgan Chase’s operational systems also depends on the competence and reliability of its employees, as well as the employees of third parties on whom JPMorgan Chase depends for technological support, security or other services. JPMorgan Chase could be materially and adversely affected by a significant operational breakdown or failure caused by human error or
 
misconduct by an employee of JPMorgan Chase or a third party.
JPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with new products or processes.
When JPMorgan Chase changes processes or introduces new products and services or new connectivity solutions, JPMorgan Chase may not fully appreciate or identify new operational risks that may arise from those changes, or may fail to implement adequate controls to mitigate the risks associated with new business activities. Any of these occurrences could diminish JPMorgan Chase’s ability to operate one or more of its businesses or result in:
potential liability to clients and customers
increased operating expenses
higher litigation costs, including regulatory fines, penalties and other sanctions
damage to JPMorgan Chase’s reputation
impairment of JPMorgan Chase’s liquidity
regulatory intervention, or
weaker competitive standing.
Any of the foregoing consequences could materially and adversely affect JPMorgan Chase’s businesses and results of operations.
JPMorgan Chase’s connections to third-party operational systems expose it to greater operational risks.
Third parties with which JPMorgan Chase does business, as well as retailers, data aggregators and other third parties with which JPMorgan Chase’s customers do business, can also be sources of operational risk to JPMorgan Chase. This is particularly the case where activities of customers or those third parties are beyond JPMorgan Chase’s security and control systems, including through the use of the internet, personal smart phones and other mobile devices or services.
If a third party obtains access to customer account data on JPMorgan Chase’s systems, and that third party experiences a cyberbreach of its own systems or misappropriates that data, this could result in a variety of negative outcomes for JPMorgan Chase and its customers, including:
heightened risk that third parties will be able to execute fraudulent transactions using JPMorgan Chase’s systems
losses from fraudulent transactions, as well as potential liability for losses that exceed thresholds established in consumer protection laws and regulations
increased operational costs to remediate the consequences of the third party’s security breach, and
harm to reputation arising from the perception that JPMorgan Chase’s systems may not be secure.

 
 
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As JPMorgan Chase’s interconnectivity with customers and other third parties expands, JPMorgan Chase increasingly faces the risk of operational failure with respect to their systems. Security breaches affecting JPMorgan Chase’s customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting those other third parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information. These actions can increase JPMorgan Chase’s operational costs and potentially diminish customer satisfaction.
JPMorgan Chase faces substantial legal and operational risks in safeguarding personal information.
JPMorgan Chase’s businesses are subject to complex and evolving laws and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. The protected parties can include:
JPMorgan Chase’s clients and customers
clients and customers of JPMorgan Chase’s clients and customers
JPMorgan Chase’s employees, and
employees of JPMorgan Chase’s suppliers, counterparties and other third parties.
Ensuring that JPMorgan Chase’s collection, use, transfer and storage of personal information comply with all applicable laws and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:
increase JPMorgan Chase’s operating costs
affect the development of new products or services
demand significant oversight by JPMorgan Chase’s management, and
require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways.
Furthermore, JPMorgan Chase cannot ensure that all of its clients and customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal, confidential or proprietary information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:
erroneously provided to parties who are not permitted to have the information, or
intercepted or otherwise compromised by third parties.
Concerns regarding the effectiveness of JPMorgan Chase’s measures to safeguard personal information, or even the perception that those measures are inadequate, could cause
 
JPMorgan Chase to lose existing or potential clients and customers, and thereby reduce JPMorgan Chase’s revenues. Furthermore, any failure or perceived failure by JPMorgan Chase to comply with applicable privacy or data protection laws and regulations may subject it to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices, significant liabilities or regulatory fines, penalties or other sanctions. Any of these could damage JPMorgan Chase’s reputation and otherwise adversely affect its businesses.
JPMorgan Chase’s operations and results could be vulnerable to catastrophes or other events that disrupt its business.
JPMorgan Chase’s business and operational systems could be seriously disrupted by events that are wholly or partially beyond its control, including:
cyberbreaches or breaches of physical premises
electrical or telecommunications outages
failures of, or loss of access to, operational systems, including computer systems, servers, networks and other technology assets
damage to or loss of property or assets
natural disasters or severe weather conditions
health emergencies or pandemics, or
events arising from local or larger-scale political events, including outbreaks of hostilities or terrorist acts.
JPMorgan Chase maintains a global resiliency and crisis management program that is intended to ensure the ability to recover critical business functions and supporting assets, including staff, technology and facilities, in the event of a business interruption. There can be no assurance that JPMorgan Chase’s resiliency plans will fully mitigate all potential business continuity risks to JPMorgan Chase or its clients and customers. Any significant failure or disruption of JPMorgan Chase’s operations or operational systems could, among other things:
hinder its ability to provide services to its clients and customers
require it to expend significant resources to correct the failure or disruption
cause it to incur financial losses, both from loss of revenue and damage to or loss of property, and
expose it to litigation or regulatory fines, penalties or other sanctions.
A successful cyberattack against JPMorgan Chase could cause significant harm to JPMorgan Chase or its clients and customers.
JPMorgan Chase experiences numerous cyberattacks on its computer systems, software, networks and other technology assets on a daily basis. These cyberattacks can

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take many forms, but a common objective of many of these attacks is to introduce computer viruses or malware into JPMorgan Chase’s systems. These viruses or malicious code are typically designed to, among other things:
obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients and customers
manipulate or destroy data
disrupt, sabotage or degrade service on JPMorgan Chase’s systems, or
steal money.
JPMorgan Chase has also been the target of significant distributed denial-of-service attacks which are intended to disrupt online banking services.
JPMorgan Chase devotes significant resources to maintain and regularly upgrade its systems to protect them against cyberattacks. However, JPMorgan Chase has experienced security breaches due to cyberattacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.
A principal reason that JPMorgan Chase cannot provide absolute security against cyberattacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase’s systems, or to implement effective preventive measures against all breaches. This is because, among other things:
the techniques used in cyberattacks change frequently and may not be recognized until launched
cyberattacks can originate from a wide variety of sources, including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments, and
third parties may seek to gain access to JPMorgan Chase’s systems either directly or using equipment or security passwords belonging to employees, customers, third-party service providers or other users of JPMorgan Chase’s systems.
The risk of a security breach due to a cyberattack could increase in the future as JPMorgan Chase continues to expand its mobile-payment and other internet-based product offerings and its internal use of web-based products and applications.
A successful penetration or circumvention of the security of JPMorgan Chase’s systems or the systems of a supplier, governmental body or another market participant could cause serious negative consequences, including:
significant disruption of JPMorgan Chase’s operations and those of its clients, customers and counterparties, including losing access to operational systems
 
misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties or employees
damage to computers or systems of JPMorgan Chase and those of its clients, customers and counterparties
inability to fully recover and restore data that has been stolen, manipulated or destroyed, or to prevent systems from processing fraudulent transactions
violations by JPMorgan Chase of applicable privacy and other laws
financial loss to JPMorgan Chase or to its clients and customers
loss of confidence in JPMorgan Chase’s cybersecurity measures
client and customer dissatisfaction
significant exposure to litigation and regulatory fines, penalties or other sanctions, or
harm to JPMorgan Chase’s reputation.
JPMorgan Chase could also suffer some of the above consequences if a third party were to misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase’s employees.
JPMorgan Chase may not be able to immediately address the consequences of a security breach due to a cyberattack.
A successful breach of JPMorgan Chase’s computer systems, software, networks or other technology assets due to a cyberattack could occur and persist for an extended period of time before being detected due to, among other things:
the breadth of JPMorgan Chase’s operations and the high volume of transactions that it processes
the large number of customers, counterparties and third-party service providers with which JPMorgan Chase does business
the proliferation and increasing sophistication of cyberattacks, and
the possibility that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems.
The extent of a particular cyberattack and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed and full and reliable information about the attack is known. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, any or all of which could

 
 
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further increase the costs and consequences of a cyberattack.
JPMorgan Chase’s risk management framework and procedures may not be effective in identifying and mitigating every risk to JPMorgan Chase.
JPMorgan Chase’s risk management framework is intended to mitigate risk and loss. JPMorgan Chase has established processes and procedures to identify, measure, monitor, report and analyze the types of risk to which JPMorgan Chase is subject. However, there are inherent limitations to risk management strategies because there may be existing or future risks that JPMorgan Chase has not appropriately anticipated or identified.
JPMorgan Chase could be exposed to unexpected losses, and JPMorgan Chase’s financial condition or results of operations could be materially and adversely affected, by any inadequacy or lapse in its risk management framework, governance structure, procedures and practices, models or reporting systems. An inadequacy or lapse could:
require significant resources to remediate
attract heightened regulatory scrutiny
expose JPMorgan Chase to regulatory investigations or legal proceedings
subject it to litigation or regulatory fines, penalties or other sanctions
harm its reputation, or
diminish confidence in JPMorgan Chase.
JPMorgan Chase relies on data to assess its various risk exposures. Any deficiencies in the quality or effectiveness of JPMorgan Chase’s data gathering and validation processes could result in ineffective risk management practices. These deficiencies could also result in inaccurate risk reporting.
JPMorgan Chase establishes allowances for probable credit losses that are inherent in its credit exposures. It then employs stress testing and other techniques to determine the capital and liquidity necessary in the event of adverse economic or market events. These processes are critical to JPMorgan Chase’s results of operations and financial condition. They require difficult, subjective and complex judgments, including forecasts of how economic conditions might impair the ability of JPMorgan Chase’s borrowers and counterparties to repay their loans or other obligations. It is possible that JPMorgan Chase will fail to identify the proper factors or that it will fail to accurately estimate the impact of factors that it identifies. 
Many of JPMorgan Chase’s risk management strategies and techniques consider historical market behavior.  These strategies and techniques are based to some degree on management’s subjective judgment. For example, many models used by JPMorgan Chase are based on assumptions regarding correlations among prices of various asset classes or other market indicators. In times of market stress, including difficult or less liquid market environments, or in
 
the event of other unforeseen circumstances, previously uncorrelated indicators may become correlated.  Conversely, previously-correlated indicators may make unrelated movements at those times. Sudden market movements and unanticipated or unidentified market or economic movements have, in some circumstances, limited the effectiveness of JPMorgan Chase’s risk management strategies, causing it to incur losses.
JPMorgan Chase could incur significant losses and face greater regulatory scrutiny if its models or estimations are inadequate.
JPMorgan Chase has developed and uses a variety of models and other analytical and judgment-based estimations to assess and implement mitigating controls over its market, credit, operational and other risks. These models and estimations are based on a variety of assumptions and historical trends, and are periodically reviewed and modified as necessary. The models and estimations that JPMorgan Chase uses may not be effective in all cases to observe and mitigate risk due to a variety of factors, such as:
reliance on historical trends that may not accurately predict future events, including assumptions underlying the models and estimations which predict correlation among certain market indicators or asset prices
inherent limitations associated with forecasting uncertain economic and financial outcomes
historical trend information may be incomplete, or may not anticipate severely negative market conditions such as extreme volatility, dislocation or lack of liquidity
technology that is introduced to run models or estimations may not perform as expected, or may not be well understood by the personnel using the technology
models and estimations may contain erroneous data, valuations, formulas or algorithms, and
review processes may fail to detect flaws in models and estimations.
JPMorgan Chase could incur substantial losses, its capital levels could be reduced and it could face greater regulatory scrutiny if its models or estimations prove to be inadequate.
Some of the models and other analytical and judgment-based estimations used by JPMorgan Chase in managing risks are subject to review by, and require the approval of, JPMorgan Chase’s regulators. These reviews are required before JPMorgan Chase may use those models and estimations in connection with calculating market risk RWA, credit risk RWA and operational risk RWA under Basel III. If JPMorgan Chase’s models or estimations are not approved by its regulators, it may be subject to higher capital charges, which could adversely affect its financial results or limit the ability to expand its businesses. JPMorgan Chase’s capital actions could also be constrained if a CCAR submission is not approved by its banking regulators due to the perceived inadequacy of its models or estimations.

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Enhanced standards for vendor risk management can result in higher costs and other potential exposures.
JPMorgan Chase must comply with enhanced standards for the assessment and management of risks associated with doing business with vendors and other third-party service providers. These requirements are contained both in bank regulatory regulations and guidance and in certain consent orders to which JPMorgan Chase has been subject. JPMorgan Chase incurs significant costs and expenses in connection with its initiatives to address the risks associated with oversight of its third party relationships. JPMorgan Chase’s failure to appropriately assess and manage third-party relationships, especially those involving significant banking functions, shared services or other critical activities, could materially adversely affect JPMorgan Chase. Specifically, any such failure could subject JPMorgan Chase to:
potential liability to clients and customers
regulatory fines, penalties or other sanctions
increased operational costs, or
harm to its reputation.
Requirements for physical settlement and delivery in trading agreements could expose JPMorgan Chase to operational and other risks.
Certain of JPMorgan Chase’s markets transactions require the physical settlement by delivery of securities or other obligations that JPMorgan Chase does not own. If JPMorgan Chase is unable to obtain the obligations within the required timeframe, JPMorgan Chase could forfeit payments otherwise due. Failures could also result in settlement delays, which could damage JPMorgan Chase’s reputation and ability to transact business. Failure to timely settle and confirm transactions could also subject JPMorgan Chase to heightened credit and operational risk, and in the event of a default, market and operational losses.
JPMorgan Chase could incur unexpected losses if estimates and judgments underlying its financial statements are incorrect.
Under U.S. generally accepted accounting principles (“U.S. GAAP”), JPMorgan Chase is required to use estimates and apply judgments in preparing its financial statements, including in determining allowances for credit losses and reserves related to litigation, among other items. Certain financial instruments require a determination of their fair value in order to prepare JPMorgan Chase’s financial statements, including:
trading assets and liabilities
instruments in the investment securities portfolio
certain loans
MSRs
structured notes, and
 
certain repurchase and resale agreements.
Where quoted market prices are not available for these types of instruments, JPMorgan Chase may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management estimates and judgment. Sudden illiquidity in markets or declines in prices of certain loans and securities may make it more difficult to value certain balance sheet items, which could lead to valuations being subsequently changed or adjusted. If estimates or judgments underlying JPMorgan Chase’s financial statements prove to have been incorrect, JPMorgan Chase may experience material losses.
Lapses in controls over disclosure or financial reporting could materially affect JPMorgan Chase’s profitability or reputation.
There can be no assurance that JPMorgan Chase’s disclosure controls and procedures will be effective in every circumstance, or that a material weakness or significant deficiency in internal control over financial reporting will not occur. Any such lapses or deficiencies could:
materially and adversely affect JPMorgan Chase’s business and results of operations or financial condition
restrict its ability to access the capital markets
require it to expend significant resources to correct the lapses or deficiencies
expose it to litigation or regulatory fines, penalties or other sanctions
harm its reputation, or
otherwise diminish investor confidence in JPMorgan Chase.
Strategic
If JPMorgan Chase’s management fails to develop and execute effective business strategies, JPMorgan Chase’s competitive standing and results could suffer.
 JPMorgan Chase’s business strategies significantly affect its competitive standing and results of operations. These strategies relate to:
the products and services that JPMorgan Chase offers
the geographies in which it operates
the types of clients and customers that it serves
the counterparties with which it does business, and
the methods and distribution channels by which it offers products and services.
The franchise values and growth prospects of JPMorgan Chase’s businesses, and its earnings and results of operations, may suffer and revenues could decline if management makes choices about these strategies and goals that:
prove to be incorrect

 
 
21

Part I

do not accurately assess the competitive landscape and industry trends, or
fail to address changing regulatory and market environments in the U.S. and abroad.
JPMorgan Chase’s growth and prospects also depend on management’s ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management’s effectiveness in this regard will affect JPMorgan Chase’s ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by management’s failure to:
devise effective business plans and strategies
effectively implement business decisions, including by minimizing bureaucratic processes
institute controls that appropriately address the risks associated with business activities and any changes in those activities
offer products and services that meet the expectations of clients and customers, and in ways that enhance their satisfaction with those products and services
allocate capital to JPMorgan Chase’s businesses in a manner that promotes their long-term profitability
adequately respond to regulatory requirements
appropriately address shareholder concerns
react quickly to changes in market conditions or market structures, or
develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase’s businesses.
Additionally, JPMorgan Chase’s Board of Directors plays an important role in exercising appropriate oversight of management’s strategic decisions, and a failure by the Board to perform this function could also impair JPMorgan Chase’s results of operations.
Conduct
Misconduct by JPMorgan Chase employees can harm its clients and customers, damage its reputation and trigger litigation and regulatory action.
JPMorgan Chase’s employees interact with clients, customers and counterparties, and with each other, every day. All employees are expected to demonstrate values and exhibit the culture and behaviors that are an integral part of JPMorgan Chase’s How We Do Business Principles, including JPMorgan Chase’s commitment to “do first class business in a first class way.” JPMorgan Chase endeavors to embed culture and conduct risk management throughout an employee’s life cycle, including recruiting, onboarding, training and development, and performance management. Culture and conduct risk management are
 
also important to JPMorgan Chase’s promotion and compensation processes.
Notwithstanding these expectations, policies and practices, certain employees have in the past engaged in improper or illegal conduct resulting in litigation as well as settlements involving consent orders, deferred prosecution agreements and non-prosecution agreements, as well as other civil and criminal settlements with regulators and other governmental entities. There is no assurance that further inappropriate actions by employees will not occur or that any such actions will always be deterred or quickly prevented.
JPMorgan Chase’s reputation could be harmed, and collateral consequences could result, from a failure by one or more employees to act consistently with JPMorgan Chase’s expectations, including by acting in ways that harm clients, customers, other market participants or other employees. Some examples of this include:
improperly selling and marketing JPMorgan Chase’s products or services
engaging in insider trading, market manipulation or unauthorized trading
facilitating illegal or aggressive tax-motivated transactions, or transactions designed to circumvent economic sanction programs
failing to fulfill fiduciary obligations or other duties owed to clients or customers
violating anti-trust or anti-competition laws by colluding with other market participants to manipulate markets, prices or indices
making risk decisions in ways that subordinate JPMorgan Chase’s risk appetite to employee compensation objectives, and
misappropriating property or confidential or proprietary information or technology belonging to JPMorgan Chase, its clients and customers or third parties.
The consequences of any failure by employees to act consistently with JPMorgan Chase’s expectations could include litigation, or regulatory or other governmental investigations or enforcement actions. Any of these proceedings or actions could result in judgments, settlements, fines, penalties or other sanctions, or lead to:
financial losses
increased operational and compliance costs
greater regulatory scrutiny
requirements that JPMorgan Chase restructure, curtail or cease certain of its activities
the need for significant oversight by JPMorgan Chase’s management
the undermining of JPMorgan Chase’s culture

22
 
 


loss of clients or customers, and
harm to JPMorgan Chase’s reputation.
Reputation
Damage to JPMorgan Chase’s reputation could harm its businesses.
Maintaining trust in JPMorgan Chase is critical to its ability to attract and retain clients, customers, investors and employees. Damage to JPMorgan Chase’s reputation can therefore cause significant harm to JPMorgan Chase’s business and prospects. Harm to JPMorgan Chase’s reputation can arise from numerous sources, including:
employee misconduct
security breaches
compliance failures
litigation or regulatory fines, penalties or other sanctions, or
regulatory investigations, enforcement actions or settlements.
JPMorgan Chase’s reputation could also be harmed by the failure or perceived failure of certain third parties to comply with laws or regulations, including companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors and other third parties with which JPMorgan Chase does business.
JPMorgan Chase’s reputation or prospects may be significantly damaged by adverse publicity or negative information regarding JPMorgan Chase, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels.
Actions by the financial services industry generally or by certain members of or individuals in the industry can also affect JPMorgan Chase’s reputation. For example, concerns that consumers have been treated unfairly by a financial institution, or that a financial institution has acted inappropriately with respect to the methods used to offer products to customers, can damage the reputation of the industry as a whole. If JPMorgan Chase is perceived to have engaged in these types of behaviors, the measures needed to address the associated reputational issues could increase JPMorgan Chase’s operational and compliance costs and negatively affect its earnings. Furthermore, events that undermine JPMorgan Chase’s reputation can hinder its ability to attract and retain clients, customers, investors and employees.
Failure to effectively manage potential conflicts of interest can result in litigation and enforcement actions, as well as damage JPMorgan Chase’s reputation.
JPMorgan Chase’s ability to manage potential conflicts of interest has become increasingly complex as its business activities encompass more transactions, obligations and
 
interests with and among JPMorgan Chase’s clients and customers. JPMorgan Chase can become subject to litigation and enforcement actions, and its reputation can be damaged, by the failure or perceived failure to, among other things:
adequately address or appropriately disclose conflicts of interest
deliver appropriate standards of service and quality
treat clients and customers fairly
use client and customer data responsibly and in a manner that meets legal requirements and regulatory expectations
provide fiduciary products or services in accordance with the applicable legal and regulatory standards, or
handle or use confidential information of customers or clients appropriately or in compliance with applicable data protection and privacy laws and regulations.
In the future, a failure or perceived failure to appropriately address conflicts or fiduciary obligations could result in customer dissatisfaction, litigation and regulatory fines, penalties or other sanctions, and heightened regulatory scrutiny and enforcement actions, all of which can lead to lost revenue and higher operating costs and cause serious harm to JPMorgan Chase’s reputation.
Country
JPMorgan Chase can incur losses due to unfavorable economic developments around the world.
JPMorgan Chase’s businesses and earnings are affected by the monetary, fiscal and other policies adopted by various U.S. and non-U.S. regulatory authorities and agencies. For example, the Federal Reserve regulates the supply of money and credit in the U.S. and its policies determine in large part the cost of funds for lending and investing in the U.S. and the return earned on those loans and investments. Changes in fiscal policies by central banks or regulatory authorities, and the manner in which those policies are executed, are beyond JPMorgan Chase’s control and may be difficult to predict. Consequently, unanticipated changes in these policies or the ways in which they are implemented could have a negative impact on JPMorgan Chase’s businesses and results of operations.
JPMorgan Chase’s businesses and revenues are also subject to the risks inherent in investing and market-making in securities, loans and other obligations of companies worldwide. These risks include, among others:
negative effects from slowing growth rates or recessionary economic conditions
the risk of loss from unfavorable political, legal or other developments, including social or political instability, in the countries or regions in which those companies operate, and
the other risks and considerations discussed below.

 
 
23

Part I

Adverse economic and political developments in a country or region can have a wider negative impact on JPMorgan Chase’s businesses.
Some countries or regions in which JPMorgan Chase operates or invests, or in which JPMorgan Chase may do business in the future, have in the past experienced severe economic disruptions particular to those countries or regions. In some cases, concerns regarding the fiscal condition of one or more countries can cause a contraction of available credit and reduced commercial activity among trading partners within the affected countries or region. These developments can also create market volatility which can lead to a contagion affecting other countries in the same region or beyond. Furthermore, governments in particular countries or regions in which JPMorgan Chase or its clients do business may choose to adopt protectionist economic or trade policies in response to concerns about domestic economic conditions. Any or all of these developments could lead to diminished cross-border trade and financing activity within that country or region, all of which could negatively affect JPMorgan Chase’s business and earnings in those jurisdictions. If JPMorgan Chase takes steps to reduce its market and credit risk exposure within a particular country or region that is experiencing economic or political disruption, it may incur losses that are higher than expected because it will be disposing of assets when market conditions are likely to be highly unfavorable.
JPMorgan Chase’s business activities with governmental entities pose a greater risk of loss.
Several of JPMorgan Chase’s businesses engage in transactions with, or trade in obligations of, governmental entities, including national, state, provincial, municipal and local authorities, both within and outside the U.S. These activities can expose JPMorgan Chase to enhanced sovereign, credit-related, operational and reputation risks, including the risks that a governmental entity may:
default on or restructure its obligations
claim that actions taken by government officials were beyond the legal authority of those officials, or
repudiate transactions authorized by a previous incumbent government.
Any or all of these actions could adversely affect JPMorgan Chase’s financial condition and results of operations and could hurt its reputation, particularly if JPMorgan Chase pursues claims against a government obligor in a jurisdiction in which it has significant business relationships with clients or customers.
JPMorgan Chase’s business and revenues in emerging markets can be hampered by local political, social and economic factors.
Some of the countries in which JPMorgan Chase conducts business have economies or markets that are less developed and more volatile, and may have legal and regulatory regimes that are less established or predictable,
 
than the U.S. and other developed markets in which JPMorgan Chase operates. Some of these countries have in the past experienced severe economic disruptions, including:
extreme currency fluctuations
high inflation
low or negative growth, or
defaults or potential defaults on sovereign debt.
The governments in these countries have sometimes reacted to these developments by imposing restrictive monetary policies such as currency exchange controls and other laws and restrictions that adversely affect the local and regional business environment. In addition, these countries, as well as certain more developed countries, have been susceptible to unfavorable social developments arising from poor economic conditions and related governmental actions, including:
social unrest
general strikes and demonstrations
crime and corruption
security and personal safety issues
outbreaks of hostilities
overthrow of incumbent governments
terrorist attacks, or
other forms of internal discord.
These economic, political and social developments have in the past resulted in, and in the future could lead to, conditions that can adversely affect JPMorgan Chase’s operations in those countries and impair the revenues, growth and profitability of those operations.
If the legal and regulatory system in a particular country is less established or predictable, this can create a more difficult environment in which to conduct business. For example, any of the following could hamper JPMorgan Chase’s operations and reduce its earnings in countries with less established or predictable legal and regulatory regimes:
the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions
the adoption of conflicting or ambiguous laws and regulations, or the inconsistent application or interpretation of existing laws and regulations
uncertainty concerning the enforceability of contractual obligations
difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive, and

24
 
 


the threat of arbitrary regulatory investigations, civil litigations or criminal prosecutions, the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.
JPMorgan Chase’s operations in or involving emerging markets countries can also be affected by governmental actions such as:
monetary policies
expropriation, nationalization or confiscation of assets
price, capital or exchange controls, and
changes in laws and regulations.
The impact of these actions could be accentuated in trading markets that are smaller, less liquid and more volatile than more-developed markets. These types of government actions can negatively affect JPMorgan Chase’s operations in the relevant country, either directly or by suppressing the business activities of local clients or multi-national clients that conduct business in the jurisdiction. For example, some or all of these governmental actions can result in funds belonging to JPMorgan Chase, or that it places with a local custodian on behalf of a client, being effectively trapped in a country. In addition to the ultimate risk of losing the funds entirely, JPMorgan Chase could be exposed for an extended period of time to the credit risk of a local custodian that is now operating in a deteriorating domestic economy.
JPMorgan Chase’s revenues from international operations and trading in non-U.S. securities and other obligations can be negatively affected by the foregoing economic, political and social conditions in a particular country in which it does business. In addition, any of the above-mentioned events or circumstances in one country can affect JPMorgan Chase’s operations and investments in another country or countries, including in the U.S.
JPMorgan Chase’s operations in the emerging markets can subject it to higher operational and compliance costs.
Conducting business in countries with less-developed legal and regulatory regimes often requires JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws and regulations, as well as structuring its operations to comply with local laws and regulations and implementing and administering related internal policies and procedures. There can be no assurance that JPMorgan Chase will always be successful in its efforts to conduct its business in compliance with laws and regulations in countries with less predictable legal and regulatory systems or that JPMorgan Chase will be able to develop effective working relationships with local regulators.
Complying with economic sanctions and anti-corruption and anti-money laundering laws and regulations can increase JPMorgan Chase’s operational and compliance costs and risks.
 
JPMorgan Chase must comply with economic sanctions and embargo programs administered by OFAC and similar national and multi-national bodies and governmental agencies outside the U.S., as well as anti-corruption and anti-money laundering laws and regulations throughout the world. JPMorgan Chase can incur higher costs and face greater compliance risks in structuring and operating its businesses to comply with these requirements. Furthermore, a violation of a sanction or embargo program or anti-corruption or anti-money laundering laws and regulations could subject JPMorgan Chase, and individual employees, to regulatory enforcement actions as well as significant civil and criminal penalties.
Competition
The financial services industry is highly competitive, and JPMorgan Chase’s results of operations will suffer if it is not a strong and effective competitor.
JPMorgan Chase operates in a highly competitive environment, and expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:
other banks and financial institutions
trading, advisory and investment management firms
finance companies and technology companies, and
other firms that are engaged in providing similar products and services.
JPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations.
New competitors have emerged. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading, payment processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.
Ongoing or increased competition may put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share. This competition may be on the basis of, among other factors, quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase’s businesses to

 
 
25

Part I

meet the expectations of clients and customers, whether due to general market conditions or underperformance, could affect JPMorgan Chase’s ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase’s revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients in order to remain competitive.
Non-U.S. competitors of JPMorgan Chase’s wholesale businesses outside the U.S. are typically subject to different, and in some cases, less stringent, legislative and regulatory regimes. The more restrictive laws and regulations applicable to JPMorgan Chase and other U.S. financial services institutions can put JPMorgan Chase and those firms at a competitive disadvantage to non-U.S. competitors. This could reduce the revenue and profitability of JPMorgan Chase’s wholesale businesses, resulting from:
prohibitions on engaging in certain transactions
higher capital and liquidity requirements
making JPMorgan Chase’s pricing of certain transactions more expensive for clients, and
adversely affecting JPMorgan Chase’s cost structure for providing certain products.
People
JPMorgan Chase’s ability to attract and retain qualified employees is critical to its success.
JPMorgan Chase’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense. JPMorgan Chase endeavors to attract talented and diverse new employees and retain and motivate its existing employees. If JPMorgan Chase were unable to continue to attract or retain qualified employees, including successors to the Chief Executive Officer or members of the Operating Committee, JPMorgan Chase’s performance, including its competitive position, could be materially and adversely affected.
Changes in immigration policies could adversely affect JPMorgan Chase.
There is the potential for changes in immigration policies in multiple jurisdictions around the world, including in the U.S. If immigration policies were to unduly restrict or otherwise make it more difficult for qualified employees to work in, or transfer among, jurisdictions in which JPMorgan Chase has operations or conducts its business, JPMorgan Chase could be adversely affected.
 
Legal
JPMorgan Chase faces significant legal risks from private actions and formal and informal regulatory investigations.
JPMorgan Chase is named as a defendant or is otherwise involved in various legal proceedings, including class actions and other litigation or disputes with third parties. Actions currently pending against JPMorgan Chase may result in judgments, settlements, fines, penalties or other results adverse to JPMorgan Chase. Any of these matters could materially and adversely affect JPMorgan Chase’s business, financial condition or results of operations, or cause serious reputational harm. As a participant in the financial services industry, it is likely that JPMorgan Chase will continue to experience a high level of litigation related to its businesses and operations.
Regulators and other government agencies conduct examinations of JPMorgan Chase and its subsidiaries both on a routine basis and in targeted exams, and JPMorgan Chase’s businesses and operations are subject to heightened regulatory oversight. This heightened regulatory scrutiny, or the results of such an investigation or examination, may lead to additional regulatory investigations or enforcement actions. There is no assurance that those actions will not result in regulatory settlements or other enforcement actions against JPMorgan Chase. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings, either by multiple federal and state agencies and officials in the U.S. or, in some instances, regulators and other governmental officials in non-U.S. jurisdictions.
If another financial institution violates a law or regulation relating to a particular business activity or practice, this will often give rise to an investigation by regulators and other governmental agencies of the same or similar activity or practice by JPMorgan Chase.
These and other initiatives by U.S. and non-U.S. governmental authorities may subject JPMorgan Chase to judgments, settlements, fines or penalties, or require JPMorgan Chase to restructure its operations and activities or to cease offering certain products or services. All of these potential outcomes could harm JPMorgan Chase’s reputation or lead to higher operational costs, thereby reducing JPMorgan Chase’s profitability, or result in collateral consequences.
Item 1B. Unresolved Staff Comments.
None.

26
 
 


Item 2. Properties.
JPMorgan Chase’s headquarters is located in New York City at 270 Park Avenue, a 50-story office building that it owns.
The Firm owned or leased facilities in the following locations at December 31, 2017.
December 31, 2017
(in millions)
Approximate square footage
 
 
United States(a)
 
New York City, New York
 
270 Park Ave, New York, New York
1.3

All other New York City locations
8.8

Total New York City, New York
10.1

 
 
Other U.S. locations
 
Columbus/Westerville, Ohio
3.7

Chicago, Illinois
2.8

Phoenix/Tempe, Arizona
2.6

Wilmington/Newark, Delaware
2.2

Dallas/Plano, Texas
2.1

Houston, Texas
2.1

Jersey City, New Jersey
1.5

All other U.S. locations
34.8

Total United States
61.9

 
 
Europe, the Middle East and Africa (“EMEA”)
 
25 Bank Street, London, U.K.
1.4

All other U.K. locations
3.0

All other EMEA locations
0.9

Total EMEA
5.3

 
 
Asia Pacific, Latin America and Canada
 
India
3.1

All other locations
3.9

Total Asia Pacific, Latin America and Canada
7.0

Total
74.2

(a)
At December 31, 2017, the Firm owned or leased 5,130 retail branches in 23 states.
The premises and facilities occupied by JPMorgan Chase are used across all of the Firm’s business segments and for corporate purposes. JPMorgan Chase continues to evaluate its current and projected space requirements and may determine from time to time that certain of its properties (including the premises and facilities noted above) are no longer necessary for its operations. There is no assurance that the Firm will be able to dispose of any such excess properties, premises, and facilities or that it will not incur costs in connection with such dispositions. Such disposition costs may be material to the Firm’s results of operations in a given period. For information on occupancy expense, see the Consolidated Results of Operations on pages 44–46.

 
Item 3. Legal Proceedings.
For a description of the Firm’s material legal proceedings, see Note 29.
Item 4. Mine Safety Disclosures.
Not applicable.

 
 
27

Part II


Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for registrant’s common equity
The outstanding shares of JPMorgan Chase common stock are listed and traded on the New York Stock Exchange. For the quarterly high and low prices of JPMorgan Chase’s common stock and cash dividends declared on JPMorgan Chase’s common stock for the last two years, see the section entitled “Supplementary information – Selected quarterly financial data (unaudited)” on page 277. For a comparison of the cumulative total return for JPMorgan Chase common stock with the comparable total return of the S&P 500 Index, the KBW Bank Index and the S&P Financial Index over the five-year period ended December 31, 2017, see “Five-year stock performance,” on page 39.
 

For information on the common dividend payout ratio, see Capital actions in the Capital Risk Management section of Management’s discussion and analysis on pages 89-90. For a discussion of restrictions on dividend payments, see Note 20 and Note 25. On January 31, 2018, there were 192,658 holders of record of JPMorgan Chase common stock. For information regarding securities authorized for issuance under the Firm’s employee share-based compensation plans, see Part III, Item 12 on page 31.
Repurchases under the common equity repurchase program
For information regarding repurchases under the Firm’s common equity repurchase program, see Capital actions in the Capital Risk Management section of Management’s discussion and analysis on pages 89-90.

Shares repurchased, on a settlement-date basis, pursuant to the common equity repurchase program during 2017 were as follows.
Year ended December 31, 2017
 
Total shares of common stock repurchased
 
Average price paid per share of common stock(a)
 
Aggregate repurchases of common equity (in millions)(a)
 
Dollar value
of remaining
authorized
repurchase
(in millions)(a)
 
First quarter
 
32,132,964

 
$
88.14

 
$
2,832

 
$
3,221

 
Second quarter
 
34,940,127

 
86.05

 
3,007

 
214

(b) 
Third quarter
 
51,756,892

 
92.02

 
4,763

 
14,637

 
October
 
14,248,307

 
98.04

 
1,397

 
13,241

 
November
 
19,472,405

 
98.92

 
1,926

 
11,314

 
December
 
14,006,503

 
106.02

 
1,485

 
9,830

 
Fourth quarter
 
47,727,215

 
100.74

 
4,808

 
9,830

 
Year-to-date
 
166,557,198

 
$
92.52

 
$
15,410

 
$
9,830

(c) 
(a)
Excludes commissions cost.
(b)
The $214 million unused portion under the prior Board authorization was canceled when the $19.4 billion repurchase program was authorized by the Board of Directors on June 28, 2017.
(c)
Represents the amount remaining under the $19.4 billion repurchase program.

Item 6. Selected Financial Data.
For five-year selected financial data, see “Five-year summary of consolidated financial highlights (unaudited)” on page 38.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s discussion and analysis of financial condition and results of operations, entitled “Management’s discussion and analysis,” appears on pages 40–145. Such information should be read in conjunction with the Consolidated Financial Statements and Notes thereto, which appear on pages 148–276.

 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of the quantitative and qualitative disclosures about market risk, see the Market Risk Management section of Management’s discussion and analysis on pages 121-128.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements, together with the Notes thereto and the report thereon dated February 27, 2018, of PricewaterhouseCoopers LLP, the Firm’s independent registered public accounting firm, appear on pages 146–276.
Supplementary financial data for each full quarter within the two years ended December 31, 2017, are included on page 277 in the table entitled “Selected quarterly financial

28
 
 


data (unaudited).” Also included is a “Glossary of Terms and Acronyms’’ on pages 283-289.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

Item 9A. Controls and Procedures.
The internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), “Internal Control — Integrated Framework” (“COSO 2013”) provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017. See “Management’s report on internal control over financial reporting” on page 146.
As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm’s management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. See Exhibits 31.1 and 31.2 for the Certifications issued by the Chairman and Chief Executive Officer and Chief Financial Officer.
The Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, in a firm as large and complex as JPMorgan Chase, lapses or deficiencies in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future. For further information, see “Management’s report on internal control over financial reporting” on page 146. There was no change in the Firm’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2017, that has materially affected, or is reasonably likely to materially affect, the Firm’s internal control over financial reporting.

 
Item 9B. Other Information.
Iran threat reduction disclosure
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure may be required even where the activities, transactions or dealings were conducted in compliance with applicable law. Except as set forth below, as of the date of this report, the Firm is not aware of any other activity, transaction or dealing by any of its affiliates during the calendar year 2017 that requires disclosure under Section 219.
As previously disclosed, during the first quarter of 2017, a non-U.S. subsidiary of JPMorgan Chase processed a payment in the amount of EUR 1,466 for its client, a non-U.S. international organization, where the payment originated from entities owned or controlled by the Government of Iran. JPMorgan Chase charged a fee of EUR 2.50 for this transaction. In addition to the previously disclosed transaction, the Firm identified four other payments made in 2017 in the amounts of $68,567, $66,280, $98,143, and $110,831, that were processed by JPMorgan Chase Bank N.A. and a non-U.S. subsidiary of JPMorgan Chase for a client, a U.S.-based international publishing business, where the payments originated from educational institutions owned or controlled by the Government of Iran. JPMorgan Chase charged total fees of $3,930 for these transactions.
Each of the above payments received into both clients’ accounts, were for the purchase of informational materials, and they were therefore exempt transactions pursuant to 31. C.F.R. 560.210(c), and were all processed in compliance with the Iran-related sanctions regulations. 
JPMorgan Chase may in the future engage in similar transactions for its clients to the extent permitted by U.S. law.

 
 
29

Part III



Item 10. Directors, Executive Officers and Corporate Governance.
Executive officers of the registrant
 
Age
 
Name
(at December 31, 2017)
Positions and offices
James Dimon
61
Chairman of the Board and Chief Executive Officer; he had been President from July 2004 until January 2018.
Ashley Bacon
48
Chief Risk Officer since June 2013. He had been Deputy Chief Risk Officer since June 2012, prior to which he had been Global Head of Market Risk for the Investment Bank (now part of Corporate & Investment Bank).
Lori A. Beer(a)
50
Chief Information Officer since September 2017, prior to which she had been Chief Information Officer of the Corporate & Investment Bank since June 2016. She was Global Head of Banking Technology from January 2014 until May 2016. Prior to joining JPMorgan Chase in 2014, she was Executive Vice President of Specialty Businesses and Information Technology for Anthem, Inc.

Mary Callahan Erdoes
50
Chief Executive Officer of Asset & Wealth Management since September 2009, prior to which she had been Chief Executive Officer of Wealth Management.
Stacey Friedman
49
General Counsel since January 2016, prior to which she was Deputy General Counsel since July 2015 and General Counsel for the Corporate & Investment Bank since August 2012. Prior to joining JPMorgan Chase in 2012, she was a partner at the law firm of Sullivan & Cromwell LLP.
Marianne Lake
48
Chief Financial Officer since January 2013, prior to which she had been Chief Financial Officer of Consumer & Community Banking since 2009.
Robin Leopold(b)
53
Head of Human Resources since January 2018, prior to which she had been Head of Human Resources for the Corporate & Investment Bank since 2012. She was a Human Resources Executive serving the Firm’s Corporate functions from February 2010 until August 2012.

Douglas B. Petno
52
Chief Executive Officer of Commercial Banking since January 2012, prior to which he had been Chief Operating Officer of Commercial Banking.
Daniel E. Pinto(c)
55
Co-President and Co-Chief Operating Officer since January 30, 2018, Chief Executive Officer of the Corporate & Investment Bank since March 2014, and Chief Executive Officer of Europe, the Middle East and Africa since June 2011. He had been Co-Chief Executive Officer of the Corporate & Investment Bank from July 2012 until March 2014, prior to which he had been head or Co-head of the Global Fixed Income business from November 2009 until July 2012.
Peter Scher(a)
  
56
Head of Corporate Responsibility since 2011 and Chairman of the Mid-Atlantic Region since 2015.

Gordon A. Smith(c)
59
Co-President and Co-Chief Operating Officer since January 30, 2018, and Chief Executive Officer of Consumer & Community Banking since December 2012. He had been Co-Chief Executive Officer from July 2012 until December 2012, prior to which he had been Chief Executive Officer of Card Services from 2007 until 2012 and of the Auto Finance and Student Lending businesses from 2011 until 2012.
Unless otherwise noted, during the five fiscal years ended December 31, 2017, all of JPMorgan Chase’s above-named executive officers have continuously held senior-level positions with JPMorgan Chase. There are no family relationships among the foregoing executive officers. Information to be provided in Items 10, 11, 12, 13 and 14 of the Form 10-K and not otherwise included herein is incorporated by reference to the Firm’s Definitive Proxy Statement for its 2018 Annual Meeting of Stockholders to be held on May 15, 2018, which will be filed with the SEC within 120 days of the end of the Firm’s fiscal year ended December 31, 2017.
(a)
The Chief Information Officer and Head of Corporate Responsibility were both named as executive officers in 2017.
(b)
On January 1, 2018, Ms. Leopold was named Head of Human Resources. At that date, Mr. John L. Donnelly, formerly Head of Human Resources, became a Vice Chairman of JPMorgan Chase; he is no longer an executive officer of the Firm.
(c)
On January 30, 2018, Mr. Pinto and Mr. Smith were named Co-Presidents and Co-Chief Operating Officers of the Firm.

30
 
 



Item 11. Executive Compensation.
See Item 10.
 


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
For security ownership of certain beneficial owners and management, see Item 10.
The following table sets forth the total number of shares available for issuance under JPMorgan Chase’s employee share-based incentive plans (including shares available for issuance to non-employee directors). The Firm is not authorized to grant share-based incentive awards to non-employees, other than to non-employee directors.
December 31, 2017
Number of shares to be issued upon exercise of outstanding options/stock appreciation rights
 
Weighted-average
exercise price of
outstanding
options/stock appreciation rights
 
Number of shares remaining available for future issuance under stock compensation plans
Plan category
 
 
 
 
 
 
 
 
Employee share-based incentive plans approved by shareholders
17,492,607

(a) 
 
$
40.76

 
 
66,828,172

(b) 
Total
17,492,607

 
 
$
40.76

 
 
66,828,172

 
(a)
Does not include restricted stock units or performance stock units granted under the shareholder-approved Long-Term Incentive Plan (“LTIP”), as amended and restated effective May 19, 2015. For further discussion, see Note 9.
(b)
Represents shares available for future issuance under the shareholder-approved LTIP.
All shares available for future issuance will be issued under the shareholder-approved LTIP. For further discussion, see Note 9.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
See Item 10.
Item 14. Principal Accounting Fees and Services.
See Item 10.

 
 
31

Part IV



Item 15. Exhibits, Financial Statement Schedules.
1
 
Financial statements
 
 
The Consolidated Financial Statements, the Notes thereto and the report of the Independent Registered Public Accounting Firm thereon listed in Item 8 are set forth commencing on page 147.
 
 
 
2
 
Financial statement schedules
 
 
 
3
 
Exhibits
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
3.3
 
 
 
 
 
 
 
3.4
 
 
 
 
3.5
 
 
 
 
3.6
 
 
 
 
3.7
 
 
 
 
 
3.8
 
 
 
 
3.9
 
 
 
 
3.10
 
 
 
 
3.11
 
 
 
 
3.12
 
3.13
 
 
 
 
3.14
 
 
 
 
3.15
 
 
 
 
3.16
 
 
 
 
3.17
 

 
 
 

32
 
 


3.18
 

4.1(a)
 
 
 
 
4.1(b)
 
 
 
 
4.2(a)
 
 
 
 
4.2(b)
 
 
 
 
4.3(a)
 
 
 
 
4.3(b)
 
 
 
 
4.4
 
 
 
 
 
4.5
 
 
 
 
4.6
 
 
 
 
Other instruments defining the rights of holders of long-term debt securities of JPMorgan Chase & Co. and its subsidiaries are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. JPMorgan Chase & Co. agrees to furnish copies of these instruments to the SEC upon request.
 
 
 
10.1
 
 
 
 
10.2
 
 
 
 
10.3
 
 
 
 
10.4
 
 
 
 
10.5
 
 
 
 
10.6
 
 
 
 
10.7
 
 
 
 

 
 
33

Part IV


10.8
 
 
 
 
10.9
 
 
 
 
10.10
 
 
 
 
10.11
 
 
 
 
10.12
 
 
 
 
10.13
 
 
 
 
10.14
 
 
 
 
10.15
 
 
 
 
 
10.16
 
 
 
 
10.17
 
 
 
 
10.18
 
 
 
 
10.19
 
 
 
 
10.20
 
 
 
 
10.21
 
 
 
 
10.22
 
 
 
 
12.1
 
 
 
 
12.2
 
 
 
 
21
 
 
 
 
22
 
Annual Report on Form 11-K of The JPMorgan Chase 401(k) Savings Plan for the year ended December 31, 2017 (to be filed pursuant to Rule 15d-21 under the Securities Exchange Act of 1934).

34
 
 


 
 
 
23
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32
 
 
 
 
101.INS
 
XBRL Instance Document.(b)(d)
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema
Document.(b)
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.(b)
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.(b)
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.(b)
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.(b)
(a)
This exhibit is a management contract or compensatory plan or arrangement.
(b)
Filed herewith.
(c)
Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(d)
Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language) interactive data files: (i) the Consolidated statements of income for the years ended December 31, 2017, 2016 and 2015, (ii) the Consolidated statements of comprehensive income for the years ended December 31, 2017, 2016 and 2015, (iii) the Consolidated balance sheets as of December 31, 2017 and 2016, (iv) the Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2017, 2016 and 2015, (v) the Consolidated statements of cash flows for the years ended December 31, 2017, 2016 and 2015, and (vi) the Notes to Consolidated Financial Statements.















 
 
35

























page 36 not used



Table of contents



Financial:
 
 
 
 
 
 
 
 
 
 
 
38
 
 
Audited financial statements:
 
 
 
 
 
 
 
39
 
 
146
 
 
 
 
 
 
 
 
Management’s discussion and analysis:
 
147
 
 
 
 
 
 
 
 
40
 
 
148
 
 
 
 
 
 
 
 
41
 
 
153
 
 
 
 
 
 
 
 
44
 
 
 
 
 
 
 
 
 
 
47
 
 
 
 
 
 
 
 
 
 
 
 
50
 
 
 
 
 
 
 
 
 
 
 
 
52
 
 
Supplementary information:
 
 
 
 
 
 
 
55
 
 
277
 
 
 
 
 
 
 
 
75
 
 
278
 
 
 
 
 
 
 
 
 
 
 
 
 
 
81
 
 
283
 
 
 
 
 
 
 
 
99
 
 
 
 
 
 
 
 
 
 
 
 
121
 
 
 
 
 
 
 
 
 
 
 
 
129
 
 
 
 
 
 
 
 
 
 
 
 
131
 
 
 
 
 
 
 
 
 
 
 
 
138
 
 
 
 
 
 
 
 
 
 
 
 
141
 
 
 
 
 
 
 
 
 
 
 
 
145
 
 
 
 
 
 
 
 
 
 
 
 


JPMorgan Chase & Co./2017 Annual Report
 
37

Financial

FIVE-YEAR SUMMARY OF CONSOLIDATED FINANCIAL HIGHLIGHTS
(unaudited)
As of or for the year ended December 31,
(in millions, except per share, ratio, headcount data and where otherwise noted)
 
 
 
 
 
 
 
 
2017
2016
 
2015
2014
2013
Selected income statement data
 
 
 
 
 
 
 
Total net revenue
 
$
99,624

$
95,668

 
$
93,543

$
95,112

$
97,367

Total noninterest expense
 
58,434

55,771

 
59,014

61,274

70,467

Pre-provision profit
 
41,190

39,897

 
34,529

33,838

26,900

Provision for credit losses
 
5,290

5,361

 
3,827

3,139

225

Income before income tax expense
 
35,900

34,536

 
30,702

30,699

26,675

Income tax expense
 
11,459

9,803

 
6,260

8,954

8,789

Net income(a)
 
$
24,441

$
24,733

 
$
24,442

$
21,745

$
17,886

Earnings per share data
 
 
 
 
 
 
 
Net income: Basic
 
$
6.35

$
6.24

 
$
6.05

$
5.33

$
4.38

              Diluted
 
6.31

6.19

 
6.00

5.29

4.34

Average shares: Basic
 
3,551.6

3,658.8

 
3,741.2

3,808.3

3,832.4

              Diluted
 
3,576.8

3,690.0

 
3,773.6

3,842.3

3,864.9

Market and per common share data
 
 
 
 
 
 
 
Market capitalization
 
$
366,301

$
307,295

 
$
241,899

$
232,472

$
219,657

Common shares at period-end
 
3,425.3

3,561.2

 
3,663.5

3,714.8

3,756.1

Share price:(b)
 
 
 
 
 
 
 
High
 
$
108.46

$
87.39

 
$
70.61

$
63.49

$
58.55

Low
 
81.64

52.50

 
50.07

52.97

44.20

Close
 
106.94

86.29

 
66.03

62.58

58.48

Book value per share
 
67.04

64.06

 
60.46

56.98

53.17

Tangible book value per share (“TBVPS”)(c)
 
53.56

51.44

 
48.13

44.60

40.72

Cash dividends declared per share
 
2.12

1.88

 
1.72

1.58

1.44

Selected ratios and metrics
 
 
 
 
 
 
 
Return on common equity (“ROE”)
 
10
%
10
%
 
11
%
10
%
9
%
Return on tangible common equity (“ROTCE”)(c)
 
12

13

 
13

13

11

Return on assets (“ROA”)
 
0.96

1.00

 
0.99

0.89

0.75

Overhead ratio
 
59

58

 
63

64

72

Loans-to-deposits ratio
 
64

65

 
65

56

57

High quality liquid assets (“HQLA”) (in billions)(d)
 
$
556

$
524

 
$
496

$
600

$
522

Common equity tier 1 (“CET1”) capital ratio(e)
 
12.2
%
12.3
%
(i) 
11.8
%
10.2
%
10.7
%
Tier 1 capital ratio(e)
 
13.9

14.0

(i) 
13.5

11.6

11.9

Total capital ratio(e)
 
15.9

15.5

 
15.1

13.1

14.3

Tier 1 leverage ratio(e)
 
8.3

8.4

 
8.5

7.6

7.1

Selected balance sheet data (period-end)
 
 
 
 
 
 
 
Trading assets
 
$
381,844

$
372,130

 
$
343,839

$
398,988

$
374,664

Securities
 
249,958

289,059

 
290,827

348,004

354,003

Loans
 
930,697

894,765

 
837,299

757,336

738,418

Core Loans
 
863,683

806,152

 
732,093

628,785

583,751

Average core loans
 
829,558

769,385

 
670,757

596,823

563,809

Total assets
 
2,533,600

2,490,972

 
2,351,698

2,572,274

2,414,879

Deposits
 
1,443,982

1,375,179

 
1,279,715

1,363,427

1,287,765

Long-term debt(f)
 
284,080

295,245

 
288,651

276,379

267,446

Common stockholders’ equity
 
229,625

228,122

 
221,505

211,664

199,699

Total stockholders’ equity
 
255,693

254,190

 
247,573

231,727

210,857

Headcount
 
252,539

243,355

 
234,598

241,359

251,196

Credit quality metrics
 
 
 
 
 
 
 
Allowance for credit losses
 
$
14,672

$
14,854

 
$
14,341

$
14,807

$
16,969

Allowance for loan losses to total retained loans
 
1.47
%
1.55
%
 
1.63
%
1.90
%
2.25
%
Allowance for loan losses to retained loans excluding purchased credit-impaired loans(g)
 
1.27

1.34

 
1.37

1.55

1.80

Nonperforming assets
 
$
6,426

$
7,535

 
$
7,034

$
7,967

$
9,706

Net charge-offs(h)
 
5,387

4,692

 
4,086

4,759

5,802

Net charge-off rate(h)
 
0.60
%
0.54
%
 
0.52
%
0.65
%
0.81
%
(a)
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The Firm’s results included a $2.4 billion decrease to net income as a result of the enactment of the TCJA. For additional information related to the impact of the TCJA, see Note 24.
(b)
Based on daily prices reported by the New York Stock Exchange.
(c)
TBVPS and ROTCE are non-GAAP financial measures. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Financial Performance Measures on pages 52–54.
(d)
HQLA represents the amount of assets that qualify for inclusion in the liquidity coverage ratio. For December 31, 2017, the balance represents the average of quarterly reported results per the U.S. LCR public disclosure requirements effective April 1, 2017. Prior periods represent period-end balances under the final U.S. rule (“U.S. LCR”) for December 31, 2016 and 2015, and the Firm’s estimated amount for December 31, 2014 prior to the effective date of the final rule, and under the Basel III liquidity coverage ratio (“Basel III LCR”) for December 31, 2013. For additional information, see LCR and HQLA on page 93.    
(e)
Ratios presented are calculated under the Basel III Transitional rules, which became effective on January 1, 2014, and for the capital ratios, represent the Collins Floor. Prior to 2014, the ratios were calculated under the Basel I rules. See Capital Risk Management on pages 82–91 for additional information on Basel III.
(f)
Included unsecured long-term debt of $218.8 billion, $212.6 billion, $211.8 billion, $207.0 billion and $198.9 billion respectively, as of December 31, of each year presented.
(g)
Excluded the impact of residential real estate purchased credit-impaired (“PCI”) loans, a non-GAAP financial measure. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54, and the Allowance for credit losses on pages 117–119.
(h)
Excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for the year ended December 31, 2017 would have been 0.55%.
(i)
The prior period ratios have been revised to conform with the current period presentation.

38
 
JPMorgan Chase & Co./2017 Annual Report



FIVE-YEAR STOCK PERFORMANCE
The following table and graph compare the five-year cumulative total return for JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) common stock with the cumulative return of the S&P 500 Index, the KBW Bank Index and the S&P Financial Index. The S&P 500 Index is a commonly referenced equity benchmark in the United States of America (“U.S.”), consisting of leading companies from different economic sectors. The KBW Bank Index seeks to reflect the performance of banks and thrifts that are publicly traded in the U.S. and is composed of leading national money center and regional banks and thrifts. The S&P Financial Index is an index of financial companies, all of which are components of the S&P 500. The Firm is a component of all three industry indices.
The following table and graph assume simultaneous investments of $100 on December 31, 2012, in JPMorgan Chase common stock and in each of the above indices. The comparison assumes that all dividends are reinvested.
December 31,
(in dollars)
2012

 
2013

 
2014

 
2015

 
2016

 
2017

JPMorgan Chase
$
100.00

 
$
136.71

 
$
150.22

 
$
162.79

 
$
219.06

 
$
277.62

KBW Bank Index
100.00

 
137.76

 
150.66

 
151.39

 
194.55

 
230.72

S&P Financial Index
100.00

 
135.59

 
156.17

 
153.72

 
188.69

 
230.47

S&P 500 Index
100.00

 
132.37

 
150.48

 
152.55

 
170.78

 
208.05


December 31,
(in dollars)
chart-956064e18cb45ede99f.jpg
 

JPMorgan Chase & Co./2017 Annual Report
 
39

Management’s discussion and analysis

This section of JPMorgan Chase’s Annual Report for the year ended December 31, 2017 (“Annual Report”), provides Management’s discussion and analysis of financial condition and results of operations (“MD&A”) of JPMorgan Chase. See the Glossary of Terms and Acronyms on pages 283-289 for definitions of terms used throughout this Annual Report. The MD&A included in this Annual Report contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm’s actual results to differ materially from those set forth in such forward-looking statements. Certain of such risks and uncertainties are described herein (see Forward-looking Statements on page 145) and in JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), in Part I, Item 1A: Risk factors; reference is hereby made to both.

INTRODUCTION
JPMorgan Chase & Co., a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide; the Firm had $2.5 trillion in assets and $255.7 billion in stockholders’ equity as of December 31, 2017. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world’s most prominent corporate, institutional and government clients.
JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), a national banking association with U.S. branches in 23 states, and Chase Bank USA, National Association (“Chase Bank USA, N.A.”), a national banking association that is the Firm’s principal credit card-issuing bank. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities LLC (“JPMorgan Securities”), a U.S. broker-dealer. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Firm’s principal operating subsidiary in the U.K. is J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A.
 
For management reporting purposes, the Firm’s activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business is the Consumer & Community Banking (“CCB”) segment. The Firm’s wholesale business segments are Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”). For a description of the Firm’s business segments, and the products and services they provide to their respective client bases, refer to Business Segment Results on pages 55–74, and Note 31.


40
 
JPMorgan Chase & Co./2017 Annual Report



EXECUTIVE OVERVIEW
This executive overview of the MD&A highlights selected information and may not contain all of the information that is important to readers of this Annual Report. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm and its various lines of business, this Annual Report should be read in its entirety.
Financial performance of JPMorgan Chase
 
 
Year ended December 31,
(in millions, except per share data and ratios)
 
2017
2016
 
Change
Selected income statement data
 
 
 
 
Total net revenue
$
99,624

$
95,668

 
4
 %
Total noninterest expense
58,434

55,771

 
5

Pre-provision profit
41,190

39,897

 
3

Provision for credit losses
5,290

5,361

 
(1
)
Net income
24,441

24,733

 
(1
)
Diluted earnings per share
6.31

6.19

 
2

Selected ratios and metrics
 
 
 
 
Return on common equity
10
%
10
%
 
 
Return on tangible common equity
12

13

 
 
Book value per share
$
67.04

$
64.06

 
5

Tangible book value per share
53.56

51.44

 
4

Capital ratios(a)
 
 
 
 
CET1
12.2
%
12.3
%
(b) 
 
Tier 1 capital
13.9

14.0

(b) 
 
Total capital
15.9

15.5

 
 
(a)
Ratios presented are calculated under the Basel III Transitional rules and represent the Collins Floor. See Capital Risk Management on pages 82–91 for additional information on Basel III.
(b)
The prior period ratios have been revised to conform with the current period presentation.
Comparisons noted in the sections below are calculated for the full year of 2017 versus the full year of 2016, unless otherwise specified.
Summary of 2017 results
JPMorgan Chase reported strong results for full year 2017 with net income of $24.4 billion, or $6.31 per share, on net revenue of $99.6 billion. The Firm reported ROE of 10% and ROTCE of 12%. The Firm’s results included a $2.4 billion decrease to net income as a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”), driven by a deemed repatriation charge and adjustments to the value of the Firm’s tax-oriented investments, partially offset by a benefit from the revaluation of the Firm’s net deferred tax liability. For additional information related to the impact of the TCJA, refer to Note 24.
Net income decreased 1% driven by higher noninterest expense and income tax expense, predominantly offset by higher net interest income.
Total net revenue increased by 4% driven by higher net interest income and investment banking fees, partially
 
offset by lower Fixed Income Markets and Home Lending noninterest revenue.
Noninterest expense was $58.4 billion, up 5%, driven by higher compensation expense, auto lease depreciation expense and continued investments across the businesses.
The provision for credit losses was $5.3 billion, relatively flat compared with the prior year, reflecting a decrease in the wholesale provision driven by credit quality improvements in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios, offset by an increase in the consumer provision. The increase in the consumer provision was driven by higher net charge-offs and a higher addition to the allowance for loan losses in the credit card portfolio, and the impact of the sale of the student loan portfolio.
The total allowance for credit losses was $14.7 billion at December 31, 2017, and the Firm had a loan loss coverage ratio, excluding the PCI portfolio, of 1.27%, compared with 1.34% in the prior year. The Firm’s nonperforming assets totaled $6.4 billion, a decrease from the prior-year level of $7.5 billion.
Firmwide average core loans increased 8%.
Selected capital-related metrics
The Firm’s Basel III Fully Phased-In CET1 capital was $183 billion, and the Standardized and Advanced CET1 ratios were 12.1% and 12.7%, respectively.
The Firm’s Fully Phased-In supplementary leverage ratio (“SLR”) was 6.5%.
The Firm continued to grow tangible book value per share (“TBVPS”), ending 2017 at $53.56, up 4%.
ROTCE and TBVPS are non-GAAP financial measures. Core loans and each of the Fully Phased-In capital and leverage measures are considered key performance measures. For a further discussion of each of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54, and Capital Risk Management on pages 82–91.

JPMorgan Chase & Co./2017 Annual Report
 
41

Management’s discussion and analysis

Lines of business highlights
Selected business metrics for each of the Firm’s four lines of business are presented below for the full year of 2017.
CCB
ROE 17%
 
Average core loans up 9%; average deposits of $640 billion, up 9%
Client investment assets of $273 billion, up 17%
Credit card sales volume up 14% and merchant processing volume up 12%
CIB
ROE 14%
 
Maintained #1 ranking for Global Investment Banking fees with 8.1% wallet share
Investment Banking revenue up 12%; Treasury Services revenue up 15%; and Securities Services revenue up 9%
CB
ROE 17%
 
Record revenue of $8.6 billion, up 15%; record net income of $3.5 billion, up 33%
Average loan balances of $198 billion, up 10%
AWM
ROE 25%
 
Record revenue of $12.9 billion, up 7%; record net income of $2.3 billion, up 4%
Average loan balances of $123 billion, up 9%
Record assets under management (“AUM”) of $2.0 trillion, up 15%
For a detailed discussion of results by line of business, refer to the Business Segment Results on pages 55–56.
Credit provided and capital raised
JPMorgan Chase continues to support consumers, businesses and communities around the globe. The Firm provided credit and raised capital of $2.3 trillion for wholesale and consumer clients during 2017:
$258 billion of credit for consumers
$22 billion of credit for U.S. small businesses
$817 billion of credit for corporations
$1.1 trillion of capital raised for corporate clients and non-U.S. government entities
$92 billion of credit and capital raised for U.S. government and nonprofit entities, including states, municipalities, hospitals and universities.
 
Recent events
On February 21, 2018, the Firm announced its intent to pursue building a new 2.5 million square foot headquarters at its 270 Park Avenue location in New York City. The project will be subject to various approvals, and the Firm will work closely with the New York City Council and State officials to complete the project in a manner that benefits all constituencies. Once the project’s approvals are granted, redevelopment and construction are expected to begin in 2019 and take approximately five years to complete. The project is not expected to have a material impact on the company’s financial results.
On January 30, 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase announced that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. Through a new independent company, the initial focus will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.
On January 29, 2018, JPMorgan Chase announced that Daniel Pinto, Chief Executive Officer (“CEO”) of CIB, and Gordon Smith, CEO of CCB, have been appointed Co-Presidents and Co-Chief Operating Officers (“COO”) of the Firm, effective January 30, 2018, and will continue to report to Jamie Dimon, Chairman and CEO. In addition to their current roles, Mr. Pinto and Mr. Smith will work closely with Mr. Dimon to help drive critical Firmwide opportunities. Responsibilities for the rest of the Firm’s Operating Committee will remain unchanged, with its members continuing to report to Mr. Dimon.
On January 23, 2018, the Firm announced a $20 billion, five-year comprehensive investment to help its employees and support job and economic growth in the U.S. Through these new investments, the Firm plans to develop hundreds of new branches in several new U.S. markets, increase wages and benefits for hourly U.S. employees, make increased small business and mortgage lending commitments, add approximately 4,000 jobs throughout the country, and increase philanthropic investments.
On December 22, 2017, the TCJA was signed into law. The Firm’s results included a $2.4 billion decrease to net income as a result of the enactment of the TCJA. For additional information related to the impact of the TCJA, see Note 24.
During the second half of 2017, natural disasters caused significant disruptions to individuals and businesses, and damage to homes and communities in several regions where the Firm conducts business. The Firm continues to provide assistance to customers, clients, communities and employees who have been affected by these disasters. These events did not have a material impact on the Firm’s 2017 financial results.

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JPMorgan Chase & Co./2017 Annual Report



2018 outlook
These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm’s actual results to differ materially from those set forth in such forward-looking statements. See Forward-Looking Statements on page 145 and the Risk Factors section on pages 8–26. There is no assurance that actual results for the full year of 2018 will be in line with the outlook set forth below, and the Firm does not undertake to update any forward-looking statements.
JPMorgan Chase’s outlook for 2018 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client and customer activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these interrelated factors will affect the performance of the Firm and its lines of business. The Firm expects that it will continue to make appropriate adjustments to its businesses and operations in response to ongoing developments in the legal, regulatory, business and economic environments in which it operates.
Firmwide
As a result of the change in tax rate due to the TCJA, management expects a reduction in tax-equivalent adjustments, decreasing both revenue and income tax expense, on a managed basis, by approximately $1.2 billion on an annual run-rate basis.
Management expects the new revenue recognition accounting standard to increase both noninterest revenue and expense for full-year 2018 by approximately $1.2 billion, with most of the impact in the AWM business. For additional information on the new accounting standard, see Accounting and Reporting Developments on page 141.
Management expects first-quarter 2018 net interest income, on a managed basis, to be down modestly compared with the fourth quarter of 2017, driven by the impact of the TCJA and a lower day count. For full-year 2018, management expects net interest income, on a managed basis, to be in the $54 to $55 billion range, market dependent, and assuming expected core loan growth. Management expects Firmwide average core loan growth to be in the 6% to 7% range in 2018, excluding CIB loans.
Excluding the impact of the new revenue recognition accounting standard, management expects Firmwide noninterest revenue for full-year 2018, on a managed basis, to be up approximately 7%, depending on market conditions.

 
The Firm continues to take a disciplined approach to managing its expenses, while investing for growth and innovation. As a result, management expects Firmwide adjusted expense for full-year 2018 to be less than $62 billion, excluding the impact of the new revenue recognition accounting standard.
Management estimates the full-year 2018 effective income tax rate to be in the 19% to 20% range, depending upon several factors, including the geographic mix of taxable income and refinements to estimates of the impacts of the TCJA.
Management expects net charge-off rates to remain relatively flat across the wholesale and consumer portfolios, with the exception of Card.
CCB
Management expects the full-year 2018 Card Services net revenue rate to be approximately 11.25%.
In Card, management expects the net charge-off rate to increase to approximately 3.25% in 2018.
CIB
Markets revenue in the first-quarter 2018 is expected to be up by mid to high single digit percentage points when compared with the prior-year quarter; actual Markets revenue results will continue to be affected by market conditions, which can be volatile.


JPMorgan Chase & Co./2017 Annual Report
 
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Management’s discussion and analysis