Document



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.

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.

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

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

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

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

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

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

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


•	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


•	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

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,

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.

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

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

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


•	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


•	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.

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

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

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.

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


•	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


•	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.

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


•	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

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.

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.

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.

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.



	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.




23		Consent of independent registered public accounting firm.(b)

31.1		Certification.(b)

31.2		Certification.(b)

32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(c)

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.

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		%

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.

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.

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.

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.

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.

This section provides a comparative discussion of JPMorgan Chase’s Consolidated Results of Operations on a reported basis for the three-year period ended December 31, 2017, unless otherwise specified. Factors that relate primarily to a single business segment are discussed in more detail within that business segment. For a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages 138–140.



Revenue
Year ended December 31, (in millions)
Year ended December 31, (in millions)	2017			2016		2015
Investment banking fees	$	7,248		$	6,448	$	6,751
Principal transactions	11,347			11,566		10,408
Lending- and deposit-related fees	5,933			5,774		5,694
Asset management, administration and commissions	15,377			14,591		15,509
Securities gains/(losses)	(66		)	141		202
Mortgage fees and related income	1,616			2,491		2,513
Card income	4,433			4,779		5,924
Other income^(a)	3,639			3,795		3,032
Noninterest revenue	49,527			49,585		50,033
Net interest income	50,097			46,083		43,510
Total net revenue	$	99,624		$	95,668	$	93,543


(a)	Included operating lease income of $3.6 billion, $2.7 billion and $2.1 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

2017 compared with 2016

Investment banking fees increased reflecting higher debt and equity underwriting fees in CIB. The increase in debt underwriting fees was driven by a higher share of fees and an overall increase in industry-wide fees; and the increase in equity underwriting fees was driven by growth in industry-wide issuance, including a strong initial public offering (“IPO”) market. For additional information, see CIB segment results on pages 62–66 and Note 6.

Principal transactions revenue decreased compared with a strong prior year in CIB, primarily reflecting:


•	lower Fixed Income-related revenue driven by sustained low volatility and tighter credit spreads

partially offset by


•	higher Equity-related revenue primarily in Prime Services, and


•	higher Lending-related revenue reflecting lower fair value losses on hedges of accrual loans.

For additional information, see CIB and Corporate segment results on pages 62–66 and pages 73–74, respectively, and Note 6.

Asset management, administration and commissions revenue increased as a result of higher asset management fees in AWM and CCB, and higher asset-based fees in CIB, both driven by higher market levels. For additional information, see AWM, CCB and CIB segment results on pages 70–72, pages 57-61 and pages 62–66, respectively, and Note 6.

For information on lending- and deposit-related fees, see the segment results for CCB on pages 57-61, CIB on pages 62–66, and CB on pages 67–69 and Note 6; on securities gains, see the Corporate segment discussion on pages 73–74.

Mortgage fees and related income decreased driven by lower MSR risk management results, lower net production revenue on lower margins and volumes, and lower servicing revenue on lower average third-party loans serviced. For further information, see CCB segment results on pages 57-61, Note 6 and 15.

Card income decreased predominantly driven by higher credit card new account origination costs, largely offset

by higher card-related fees, primarily annual fees. For further information, see CCB segment results on pages 57-61 .

Other income decreased primarily due to:


•	lower other income in CIB largely driven by a $520 million impact related to the enactment of the TCJA, which reduced the value of certain of CIB’s tax-oriented investments, and


•	the absence in the current year of gains from


–	the sale of Visa Europe interests in CCB,


–	the redemption of guaranteed capital debt securities (“trust preferred securities”), and


–	the disposal of an asset in AWM

partially offset by


•	higher operating lease income reflecting growth in auto operating lease volume in CCB, and


•	a legal benefit of $645 million recorded in the second quarter of 2017 in Corporate related to a settlement with the FDIC receivership for Washington Mutual and with Deutsche Bank as trustee of certain Washington Mutual trusts.

For further information, see Note 6.

Net interest income increased primarily driven by the net impact of higher rates and loan growth across the businesses, partially offset by declines in Markets net interest income in CIB. The Firm’s average interest-earning assets were $2.2 trillion, up $79 billion from the prior year, and the net interest yield on these assets, on a fully taxable equivalent (“FTE”) basis, was 2.36%, an increase of 11 basis points from the prior year.

2016 compared with 2015

Investment banking fees decreased predominantly due to lower equity underwriting fees driven by declines in industry-wide fee levels.

Principal transactions revenue increased reflecting broad-based strength across products in CIB’s Fixed Income Markets business. Rates performance was strong, with increased client activity driven by high issuance-based flows, global political developments, and central bank actions. Credit revenue improved driven by higher market- making revenue from the secondary market as clients’ appetite for risk recovered.

Asset management, administration and commissions revenue decreased reflecting lower asset management fees in AWM driven by a reduction in revenue related to the disposal of assets at the beginning of 2016, the impact of lower average equity market levels and lower performance fees, as well as due to lower brokerage commissions and other fees in CIB and AWM.

Mortgage fees and related income were relatively flat, as lower mortgage servicing revenue related to lower average third-party loans serviced was predominantly offset by higher MSR risk management results.

Card income decreased predominantly driven by higher new account origination costs and the impact of renegotiated co-brand partnership agreements, partially offset by higher card sales volume and other card-related fees.

Other income increased primarily reflecting:


▪	higher operating lease income from growth in auto operating lease assets in CCB


▪	a gain on the sale of Visa Europe interests in CCB


▪	a gain related to the redemption of guaranteed capital debt securities


▪	the absence of losses recognized in 2015 related to the accelerated amortization of cash flow hedges associated with the exit of certain non-operating deposits


▪	a gain on disposal of an asset in AWM

partially offset by


▪	a $514 million benefit recorded in the prior year from a legal settlement in Corporate.

Net interest income increased primarily driven by loan growth across the businesses and the net impact of higher rates, partially offset by lower investment securities balances and higher interest expense on long-term debt. The Firm’s average interest-earning assets were $2.1 trillion in 2016, up $13 billion from the prior year, and the net interest yield on these assets, on a FTE basis, was 2.25%, an increase of 11 basis points from the prior year.



Provision for credit losses
Year ended December 31,
(in millions)	2017			2016		2015
Consumer, excluding credit card	$	620		$	467	$	(81	)
Credit card	4,973			4,042		3,122
Total consumer	5,593			4,509		3,041
Wholesale	(303		)	852		786
Total provision for credit losses	$	5,290		$	5,361	$	3,827

2017 compared with 2016

The provision for credit losses decreased as a result of:


•	a net $422 million reduction in the wholesale allowance for credit losses, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines, and Metals & Mining portfolios, compared with an addition of $511 million in the prior year driven by downgrades in the same portfolios

predominantly offset by


•	a higher consumer provision driven by


–	$450 million of higher net charge-offs, primarily in the credit card portfolio due to growth in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio, partially offset by a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies,


–	a $416 million higher addition to the allowance for credit losses related to the credit card portfolio driven by higher loss rates and loan growth, and a lower reduction in the allowance for the residential real estate portfolio predominantly driven by continued improvement in home prices and delinquencies, and


–	a $218 million impact in connection with the sale of the student loan portfolio.

For a more detailed discussion of the credit portfolio, the student loan sale and the allowance for credit losses, see the segment discussions of CCB on pages 57-61, CIB on pages 62–66, CB on pages 67–69, the Allowance for Credit Losses on pages 117–119 and Note 13.

2016 compared with 2015

The provision for credit losses reflected an increase in the consumer provision and, to a lesser extent, the wholesale provision. The increase in the consumer provision was predominantly driven by:


▪	a $920 million increase related to the credit card portfolio, due to a $600 million addition in the allowance for loan losses, as well as $320 million of higher net charge-offs, driven by loan growth (including growth in newer vintages which, as anticipated, have higher loss rates compared to the overall portfolio), and


▪	a $470 million lower benefit related to the residential real estate portfolio, as the reduction in the allowance for loan losses in 2016 was lower than the prior year. The reduction in both periods reflected continued improvements in home prices and lower delinquencies.

The increase in the wholesale provision was largely driven by the impact of downgrades in the Oil & Gas and Natural Gas Pipelines portfolios.



Noninterest expense
Year ended December 31,
(in millions)	2017		2016		2015
Compensation expense	$	31,009	$	29,979	$	29,750
Noncompensation expense:
Occupancy	3,723		3,638		3,768
Technology, communications and equipment	7,706		6,846		6,193
Professional and outside services	6,840		6,655		7,002
Marketing	2,900		2,897		2,708
Other^(a)(b)	6,256		5,756		9,593
Total noncompensation expense	27,425		25,792		29,264
Total noninterest expense	$	58,434	$	55,771	$	59,014


(a)	Included Firmwide legal expense/(benefit) of $(35) million, $(317) million and $3.0 billion for the years ended December 31, 2017, 2016 and 2015, respectively.


(b)	Included FDIC-related expense of $1.5 billion, $1.3 billion and $1.2 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

2017 compared with 2016

Compensation expense increased predominantly driven by investments in headcount in most businesses, including bankers and business-related support staff, and higher performance-based compensation expense, predominantly in AWM.

Noncompensation expense increased as a result of:


•	higher depreciation expense from growth in auto operating lease volume in CCB


•	contributions to the Firm’s Foundation


•	a lower legal net benefit compared to the prior year


•	higher FDIC-related expense, and


•	an impairment in CB on certain leased equipment, the majority of which was sold subsequent to year-end

partially offset by


•	the absence in the current year of two items totaling $175 million in CCB related to liabilities from a merchant in bankruptcy and mortgage servicing reserves.

For a discussion of legal expense, see Note 29.

2016 compared with 2015

Compensation expense was relatively flat predominantly driven by higher performance-based compensation expense and investments in several businesses, offset by the impact of continued expense reduction initiatives, including lower headcount in certain businesses.

Noncompensation expense decreased as a result of lower legal expense (including lower legal professional services expense), the impact of efficiencies, and reduced non-U.S. tax surcharges. These factors were partially offset by higher depreciation expense from growth in auto operating lease assets and higher investments in marketing.



Income tax expense
Year ended December 31, (in millions, except rate)
Year ended December 31, (in millions, except rate)	2017			2016			2015
Income before income tax expense	$	35,900		$	34,536		$	30,702
Income tax expense	11,459			9,803			6,260
Effective tax rate	31.9		%	28.4		%	20.4		%

2017 compared with 2016

The effective tax rate increased in 2017 driven by:

•

a $1.9 billion increase to income tax expense representing the impact of the enactment of the TCJA. The increase was driven by the deemed repatriation of the Firm’s unremitted non-U.S. earnings and adjustments to the value of certain tax-oriented investments, partially offset by a benefit from the revaluation of the Firm’s net deferred tax liability. The incremental expense resulted in a 5.4 percentage point increase to the Firm’s effective tax rate

partially offset by


•	benefits resulting from the vesting of employee share-based awards related to the appreciation of the Firm’s stock price upon vesting above their original grant price, and the release of a valuation allowance.

For further information, see Note 24.

2016 compared with 2015

The effective tax rate in 2016 was affected by changes in the mix of income and expense subject to U.S. federal and state and local taxes, tax benefits related to the utilization of certain deferred tax assets, as well as the adoption of new accounting guidance related to employee share-based incentive payments. These tax benefits were partially offset by higher income tax expense from tax audits. The lower effective tax rate in 2015 was predominantly driven by $2.9 billion of tax benefits, which reduced the Firm’s effective tax rate by 9.4 percentage points. The recognition of tax benefits in 2015 resulted from the resolution of various tax audits, as well as the release of U.S. deferred taxes associated with the restructuring of certain non-U.S. entities.

Cash and due from banks and deposits with banks increased primarily driven by deposit growth and a shift in the deployment of excess cash from securities purchased under resale agreements and investment securities into deposits with banks. The Firm’s excess cash is placed with various central banks, predominantly Federal Reserve Banks.

Federal funds sold and securities purchased under resale agreements decreased primarily due to the shift in the deployment of excess cash to deposits with banks and lower client activity in CIB. For additional information on the Firm’s Liquidity Risk Management, see pages 92–97.

Securities borrowed increased driven by higher demand for securities to cover short positions related to client-driven market-making activities in CIB.

Trading assets–debt and equity instruments increased predominantly as a result of client-driven market-making activities in CIB, primarily in Fixed Income Markets and Prime Services, partially offset by lower equity instruments in Equity Markets. For additional information, refer to

Note 2.

Trading assets and trading liabilities–derivative receivables and payables decreased predominantly as a result of client-driven market-making activities in CIB Markets, which reduced foreign exchange and interest rate derivative receivables and payables, and increased equity derivative receivables, driven by market movements. For additional information, refer to Derivative contracts on pages 114–115, and Notes 2 and 5.

Securities decreased primarily reflecting net sales, maturities and paydowns of U.S. Treasuries, non-U.S. government securities and collateralized loan obligations. For additional information, see Notes 2 and 10.

Loans increased reflecting:


•	higher wholesale loans driven by new originations in CB and higher loans to Private Banking clients in AWM


•	higher consumer loans driven by higher retention of originated high-quality prime mortgages in CCB and AWM, and higher credit card loans, largely offset by the sale of the student loan portfolio, lower home equity loans and the run-off of PCI loans.

The allowance for loan losses decreased driven by:


•	a net reduction in the wholesale allowance, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios (compared with additions to the allowance in the prior year driven by downgrades in the same portfolios)

largely offset by

•

a net increase in the consumer allowance, reflecting additions to the allowance for the credit card and business banking portfolios, driven by loan growth in both of these portfolios and higher loss rates in the credit card portfolio, largely offset by a reduction in the allowance for the residential real estate portfolio, predominantly driven by continued improvement in home prices and delinquencies, and the utilization of the allowance in connection with the sale of the student loan portfolio.

For a more detailed discussion of loans and the allowance for loan losses, refer to Credit and Investment Risk Management on pages 99–120, and Notes 2, 3, 12 and 13.

Deposits increased due to:


•	higher consumer deposits reflecting the continuation of strong growth from new and existing customers, and low attrition rates


•	higher wholesale deposits largely driven by growth in client cash management activity in CIB’s Securities Services business, partially offset by lower balances in AWM reflecting balance migration predominantly into the Firm’s investment-related products.

For more information, refer to the Liquidity Risk Management discussion on pages 92–97; and Notes 2

and 17.

Short-term borrowings increased primarily due to higher issuance of commercial paper reflecting in part a change in the mix of funding from securities sold under repurchase agreements for CIB Markets activities. For additional information, see Liquidity Risk Management on pages 92–97.

Beneficial interests issued by consolidated VIEs

decreased due to net maturities of credit card securitizations and the deconsolidation of the student loan securitization entities in connection with the portfolio’s sale. For further information on Firm-sponsored VIEs and loan securitization trusts, see Off-Balance Sheet Arrangements on pages 50–51 and Note 14 and 27; and for the sale of the student loan portfolio, see CCB segment results on pages 57-61.

Long-term debt decreased reflecting lower Federal Home Loan Bank (“FHLB”) advances, partially offset by the net issuance of senior debt and the net issuance of structured notes in CIB driven by client demand. For additional information on the Firm’s long-term debt activities, see Liquidity Risk Management on pages 92–97 and Note 19.

For information on changes in stockholders’ equity, see page 151, and on the Firm’s capital actions, see Capital actions on pages 89-90.

Consolidated Cash Flows Analysis



(in millions)	Year ended December 31,
(in millions)	2017			2016			2015
Net cash provided by/(used in)
Operating activities	$	(2,501	)	$	20,196		$	73,466
Investing activities	(10,283		)	(114,949		)	106,980
Financing activities	14,642			98,271			(187,511		)
Effect of exchange rate changes on cash	96			(135		)	(276		)
Net increase/(decrease) in cash and due from banks	$	1,954		$	3,383		$	(7,341	)

Operating activities

JPMorgan Chase’s operating assets and liabilities support the Firm’s lending and capital markets activities. These assets and liabilities can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by client-driven and risk management activities and market conditions. The Firm believes cash flows from operations, available cash and other liquidity sources, and its capacity to generate cash through secured and unsecured sources are sufficient to meet operating liquidity needs.


•	In 2017, cash used reflected an increase in held-for-investment margin loans in accrued interest and accounts receivable and a decrease in trading liabilities.


•	In 2016, cash provided reflected increases in accounts payable and trading liabilities, partially offset by cash used reflecting an increase in trading assets, an increase in accounts receivable from merchants and higher client receivables.


•	In 2015, cash provided reflected decreases in trading assets and in accounts receivable, partially offset by cash used due to a decrease in accounts payable and other liabilities.

Investing activities

The Firm’s investing activities predominantly include originating held-for-investment loans and investing in the securities portfolio and other short-term interest-earning assets.


•	In 2017, cash used primarily reflected net originations of loans and a net increase in short-term interest-earning assets, partially offset by net proceeds from paydowns, maturities, sales and purchases of investment securities.


•	In 2016, cash used reflected net originations of loans, an increase in short-term interest-earning assets, an increase in securities purchased under resale agreements, and the deployment of excess cash.


•	In 2015, cash provided predominantly reflected lower short-term interest-earning assets, and net proceeds from lower investment securities, partially offset by cash used for net originations of loans.

Financing activities

The Firm’s financing activities include acquiring customer deposits and issuing long-term debt, as well as preferred and common stock.


•	In 2017, cash provided reflected higher deposits and short-term borrowings, partially offset by a decrease in long-term borrowings.


•	In 2016, cash provided reflected higher deposits, and an increase in securities loaned or sold under repurchase agreements, and net proceeds from long term borrowings.


•	In 2015, cash used reflected lower deposits and short-term borrowings, partially offset by net proceeds from long-term borrowings. Additionally, in 2015 cash outflows reflected a decrease in securities loaned or sold under repurchase agreements.


•	For all periods, cash was used for repurchases of common stock and cash dividends on common and preferred stock.

* * *

For a further discussion of the activities affecting the Firm’s cash flows, see Consolidated Balance Sheets Analysis on pages 47-48 , Capital Risk Management on pages 82–91, and Liquidity Risk Management on pages 92–97.



Contractual cash obligations
By remaining maturity at December 31, (in millions)	2017										2016
	2018		2019-2020		2021-2022		After 2022		Total		Total
On-balance sheet obligations
Deposits^(a)	$	1,421,174	$	5,276	$	4,810	$	6,204	$	1,437,464	$	1,368,866
Federal funds purchased and securities loaned or sold under repurchase agreements	133,779		4,198		4,958		15,981		158,916		165,666
Short-term borrowings^(a)	42,664		—		—		—		42,664		26,497
Beneficial interests issued by consolidated VIEs	13,636		9,542		2,544		314		26,036		38,927
Long-term debt^(a)	37,211		63,685		43,180		116,819		260,895		288,315
Other^(b)	4,726		2,146		2,080		4,573		13,525		8,980
Total on-balance sheet obligations	1,653,190		84,847		57,572		143,891		1,939,500		1,897,251
Off-balance sheet obligations
Unsettled reverse repurchase and securities borrowing agreements^(c)	76,859		—		—		—		76,859		50,722
Contractual interest payments^(d)	9,248		11,046		7,471		26,338		54,103		48,862
Operating leases^(e)	1,526		2,750		1,844		3,757		9,877		10,115
Equity investment commitments^(f)	174		46		19		515		754		1,068
Contractual purchases and capital expenditures	1,923		937		439		204		3,503		2,566
Obligations under co-brand programs	249		500		478		207		1,434		868
Total off-balance sheet obligations	89,979		15,279		10,251		31,021		146,530		114,201
Total contractual cash obligations	$	1,743,169	$	100,126	$	67,823	$	174,912	$	2,086,030	$	2,011,452

Non-GAAP financial measures

The Firm prepares its Consolidated Financial Statements using U.S. GAAP; these financial statements appear on pages 148–152. That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Firm’s results that can be tracked consistently from year-to-year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.

In addition to analyzing the Firm’s results on a reported basis, management reviews Firmwide results, including the overhead ratio, on a “managed” basis; these Firmwide managed basis results are non-GAAP financial measures. The Firm also reviews the results of the lines of business on a managed basis. The Firm’s definition of managed basis starts, in each case, with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm (and each of the reportable business segments) on a FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. These financial measures allow management to assess the comparability of revenue from year-to-year arising from both taxable and tax-exempt sources. The corresponding

income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.

Management also uses certain non-GAAP financial measures at the Firm and business-segment level, because these other non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Firm or of the particular business segment, as the case may be, and, therefore, facilitate a comparison of the Firm or the business segment with the performance of its relevant competitors. For additional information on these non-GAAP measures, see Business Segment Results on pages 55–74.

Additionally, certain credit metrics and ratios disclosed by the Firm exclude PCI loans, and are therefore non-GAAP measures. For additional information on these non-GAAP measures, see Credit and Investment Risk Management on pages 99–120.

Non-GAAP financial measures used by the Firm may not be comparable to similarly named non-GAAP financial measures used by other companies.

Net interest income excluding CIB’s Markets businesses

In addition to reviewing net interest income on a managed basis, management also reviews net interest income excluding net interest income arising from CIB’s Markets businesses to assess the performance of the Firm’s lending, investing (including asset-liability management) and deposit-raising activities. This net interest income is referred to as non-markets related net interest income. CIB’s Markets businesses are Fixed Income Markets and Equity Markets. Management believes that disclosure of non-markets related net interest income provides investors and analysts with another measure by which to analyze the non-markets-related business trends of the Firm and provides a comparable measure to other financial institutions that are primarily focused on lending, investing and deposit-raising activities.

The data presented below are non-GAAP financial measures

due to the exclusion of markets related net interest income

arising from CIB.



Year ended December 31, (in millions, except rates)	2017			2016			2015
Net interest income – managed basis^(a)(b)	$	51,410		$	47,292		$	44,620
Less: CIB Markets net interest income^(c)	4,630			6,334			5,298
Net interest income excluding CIB Markets^(a)	$	46,780		$	40,958		$	39,322
Average interest-earning assets	$	2,180,592		$	2,101,604		$	2,088,242
Less: Average CIB Markets interest-earning assets^(c)	540,835			520,307			510,292
Average interest-earning assets excluding CIB Markets	$	1,639,757		$	1,581,297		$	1,577,950
Net interest yield on average interest-earning assets – managed basis	2.36		%	2.25		%	2.14		%
Net interest yield on average CIB Markets interest-earning assets^(c)	0.86			1.22			1.04
Net interest yield on average interest-earning assets excluding CIB Markets	2.85		%	2.59		%	2.49		%


(a)	Interest includes the effect of related hedges. Taxable-equivalent amounts are used where applicable.


(b)	For a reconciliation of net interest income on a reported and managed basis, see reconciliation from the Firm’s reported U.S. GAAP results to managed basis on page 52.


(c)	The amounts in this table differ from the prior-period presentation to align with CIB’s Markets businesses. For further information on CIB’s Markets businesses, see page 65.



Calculation of certain U.S. GAAP and non-GAAP financial measures
Certain U.S. GAAP and non-GAAP financial measures are calculated as follows:
Book value per share (“BVPS”) Common stockholders’ equity at period-end / Common shares at period-end
Overhead ratio Total noninterest expense / Total net revenue
Return on assets (“ROA”) Reported net income / Total average assets
Return on common equity (“ROE”) Net income* / Average common stockholders’ equity
Return on tangible common equity (“ROTCE”) Net income* / Average tangible common equity
Tangible book value per share (“TBVPS”) Tangible common equity at period-end / Common shares at period-end
* Represents net income applicable to common equity

Results of the business segments are intended to reflect each segment as if it were essentially a stand-alone business. The management reporting process that derives business segment results includes the allocation of certain income and expense items described in more detail below. The Firm also assesses the level of capital required for each line of business on at least an annual basis.

The Firm periodically assesses the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods.

Revenue sharing

When business segments join efforts to sell products and services to the Firm’s clients, the participating business segments agree to share revenue from those transactions. The segment results reflect these revenue-sharing agreements.

Funds transfer pricing

Funds transfer pricing is used to assign interest income and expense to each business segment and to transfer the primary interest rate risk and liquidity risk exposures to Treasury and CIO within Corporate. The funds transfer pricing process considers the interest rate risk, liquidity risk and regulatory requirements of a business segment as if it were operating independently. This process is overseen by senior management and reviewed by the Firm’s Asset-Liability Committee (“ALCO”).

Debt expense and preferred stock dividend allocation

As part of the funds transfer pricing process, almost all of the cost of the credit spread component of outstanding unsecured long-term debt and preferred stock dividends is allocated to the reportable business segments, while the balance of the cost is retained in Corporate. The methodology to allocate the cost of unsecured long-term debt and preferred stock dividends to the business segments is aligned with the Firm’s process to allocate capital. The allocated cost of unsecured long-term debt is included in a business segment’s net interest income, and net income is reduced by preferred stock dividends to arrive at a business segment’s net income applicable to common equity.

Business segment capital allocation

The amount of capital assigned to each business is referred to as equity. On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as the assumptions and methodologies used to allocate

capital. For additional information on business segment capital allocation, see Line of business equity on page 89.

Expense allocation

Where business segments use services provided by corporate support units, or another business segment, the costs of those services are allocated to the respective business segments. The expense is generally allocated based on the actual cost and use of services provided. In contrast, certain other costs related to corporate support units, or to certain technology and operations, are not allocated to the business segments and are retained in Corporate. Expense retained in Corporate generally includes parent company costs that would not be incurred if the segments were stand-alone businesses; adjustments to align corporate support units; and other items not aligned with a particular business segment.

Consumer & Community Banking offers services to consumers and businesses through bank branches, ATMs, online, mobile and telephone banking. CCB is organized into Consumer & Business Banking (including Consumer Banking/Chase Wealth Management and Business Banking), Home Lending (including Home Lending Production, Home Lending Servicing and Real Estate Portfolios) and Card, Merchant Services & Auto. Consumer & Business Banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses. Home Lending includes mortgage origination and servicing activities, as well as portfolios consisting of residential mortgages and home equity loans. Card, Merchant Services & Auto issues credit cards to consumers and small businesses, offers payment processing services to merchants, and originates and services auto loans and leases.



Selected income statement data
Year ended December 31,
(in millions, except ratios)	2017			2016			2015
Revenue
Lending- and deposit-related fees	$	3,431		$	3,231		$	3,137
Asset management, administration and commissions	2,212			2,093			2,172
Mortgage fees and related income	1,613			2,490			2,511
Card income	4,024			4,364			5,491
All other income	3,430			3,077			2,281
Noninterest revenue	14,710			15,255			15,592
Net interest income	31,775			29,660			28,228
Total net revenue	46,485			44,915			43,820

Provision for credit losses	5,572			4,494			3,059

Noninterest expense
Compensation expense	10,159			9,723			9,770
Noncompensation expense^(a)	15,903			15,182			15,139
Total noninterest expense	26,062			24,905			24,909
Income before income tax expense	14,851			15,516			15,852
Income tax expense	5,456			5,802			6,063
Net income	$	9,395		$	9,714		$	9,789

Revenue by line of business
Consumer & Business Banking	$	21,104		$	18,659		$	17,983
Home Lending	5,955			7,361			6,817
Card, Merchant Services & Auto	19,426			18,895			19,020

Mortgage fees and related income details:
Net production revenue	636			853			769
Net mortgage servicing revenue^(b)	977			1,637			1,742
Mortgage fees and related income	$	1,613		$	2,490		$	2,511

Financial ratios
Return on equity	17		%	18		%	18		%
Overhead ratio	56			55			57

Note: In the discussion and the tables which follow, CCB presents certain financial measures which exclude the impact of PCI loans; these are non-GAAP financial measures.


(a)	Included operating lease depreciation expense of $2.7 billion, $1.9 billion and $1.4 billion for the years ended December 31, 2017, 2016 and 2015, respectively.


(b)	Included MSR risk management results of $(242) million, $217 million and $(117) million for the years ended December 31, 2017, 2016 and 2015, respectively.

2017 compared with 2016

Net income was $9.4 billion, a decrease of 3%, driven by higher noninterest expense and provision for credit losses, largely offset by higher net revenue.

Net revenue was $46.5 billion, an increase of 3%.

Net interest income was $31.8 billion, up 7%, driven by higher deposit balances, deposit margin expansion, and higher loan balances in Card, partially offset by loan spread compression from higher rates, including the impact of higher funding costs in Home Lending and Auto and the impact of the sale of the student loan portfolio.

Noninterest revenue was $14.7 billion, down 4%, driven by:


•	higher new account origination costs in Card,


•	lower MSR risk management results,


•	the absence in the current year of a gain on the sale of Visa Europe interests,


•	lower net production revenue reflecting lower mortgage production margins and volumes, and


•	lower mortgage servicing revenue as a result of a lower level of third-party loans serviced

largely offset by


•	higher auto lease volume and


•	higher card- and deposit-related fees.

See Note 15 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.

Noninterest expense was $26.1 billion, an increase of 5%, driven by:


•	higher auto lease depreciation, and


•	continued business growth

partially offset by


•	two items totaling $175 million included in the prior year related to liabilities from a merchant bankruptcy and mortgage servicing reserves.

The provision for credit losses was $5.6 billion, an increase of 24%, reflecting:


•	$445 million of higher net charge-offs, primarily in the credit card portfolio due to growth in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio, partially offset by a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies,


•	a $415 million higher addition to the allowance for credit losses related to the credit card portfolio driven by higher loss rates and loan growth, and a lower reduction in the allowance for the residential real estate portfolio predominantly driven by continued improvement in home prices and delinquencies, and


•	a $218 million impact in connection with the sale of the student loan portfolio.

The sale of the student loan portfolio during 2017 did not have a material impact on the Firm’s Consolidated Financial Statements.

2016 compared with 2015

Net income was $9.7 billion, a decrease of 1%, driven by higher provision for credit losses, predominantly offset by higher net revenue.

Net revenue was $44.9 billion, an increase of 2%.

Net interest income was $29.7 billion, up 5%, driven by higher deposit balances and higher loan balances, partially offset by deposit spread compression and an increase in the reserve for uncollectible interest and fees in Card.

Noninterest revenue was $15.3 billion, down 2%, driven by higher new account origination costs and the impact of renegotiated co-brand partnership agreements in Card and lower mortgage servicing revenue predominantly as a result of a lower level of third-party loans serviced; these factors were predominantly offset by higher auto lease and card sales volume, higher card- and deposit-related fees, higher MSR risk management results and a gain on the sale of Visa Europe interests. See Note 15 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.

Noninterest expense of $24.9 billion was flat, driven by:


•	lower legal expense and branch efficiencies

offset by


•	higher auto lease depreciation, and


•	higher investment in marketing.

The provision for credit losses was $4.5 billion, an increase of 47%, reflecting:


•	a $920 million increase related to the credit card portfolio, due to a $600 million addition in the allowance for loan losses, as well as $320 million of higher net charge-offs, driven by loan growth, including growth in newer vintages which, as anticipated, have higher loss rates compared to the overall portfolio,


•	a $450 million lower benefit related to the residential real estate portfolio, as the current year reduction in the allowance for loan losses was lower than the prior year. The reduction in both periods reflected continued improvements in home prices and lower delinquencies, and


•	a $150 million increase related to the auto and business banking portfolio, due to additions to the allowance for loan losses and higher net charge-offs, reflecting loan growth in the portfolios.



Selected metrics
As of or for the year ended December 31,
(in millions, except headcount)	2017		2016		2015
Selected balance sheet data (period-end)
Total assets	$	552,601	$	535,310	$	502,652
Loans:
Consumer & Business Banking	25,789		24,307		22,730
Home equity	42,751		50,296		58,734
Residential mortgage	197,339		181,196		164,500
Home Lending	240,090		231,492		223,234
Card	149,511		141,816		131,463
Auto	66,242		65,814		60,255
Student	—		7,057		8,176
Total loans	481,632		470,486		445,858
Core loans	415,167		382,608		341,881
Deposits	659,885		618,337		557,645
Equity	51,000		51,000		51,000
Selected balance sheet data (average)
Total assets	$	532,756	$	516,354	$	472,972
Loans:
Consumer & Business Banking	24,875		23,431		21,894
Home equity	46,398		54,545		63,261
Residential mortgage	190,242		177,010		140,294
Home Lending	236,640		231,555		203,555
Card	140,024		131,165		125,881
Auto	65,395		63,573		56,487
Student	2,880		7,623		8,763
Total loans	469,814		457,347		416,580
Core loans	393,598		361,316		301,700
Deposits	640,219		586,637		530,938
Equity	51,000		51,000		51,000

Headcount	134,117		132,802		127,094



Selected metrics
As of or for the year ended December 31,
(in millions, except ratio data)	2017			2016			2015
Credit data and quality statistics
Nonaccrual loans^(a)(b)	$	4,084		$	4,708		$	5,313
Net charge-offs/(recoveries)^(c)
Consumer & Business Banking	257			257			253
Home equity	63			184			283
Residential mortgage	(16		)	14			2
Home Lending	47			198			285
Card	4,123			3,442			3,122
Auto	331			285			214
Student	498			162			210
Total net charge-offs/(recoveries)	$	5,256		$	4,344		$	4,084

Net charge-off/(recovery) rate^(c)
Consumer & Business Banking	1.03		%	1.10		%	1.16		%
Home equity^(d)	0.18			0.45			0.60
Residential mortgage^(d)	(0.01		)	0.01			—
Home Lending^(d)	0.02			0.10			0.18
Card	2.95			2.63			2.51
Auto	0.51			0.45			0.38
Student	NM			2.13			2.40
Total net charge-offs/(recovery) rate^(d)	1.21			1.04			1.10
30+ day delinquency rate
Home Lending^(e)(f)	1.19		%	1.23		%	1.57		%
Card	1.80			1.61			1.43
Auto	0.89			1.19			1.35
Student^(g)	—			1.60			1.81

90+ day delinquency rate - Card	0.92			0.81			0.72

Allowance for loan losses
Consumer & Business Banking	$	796		$	753		$	703
Home Lending, excluding PCI loans	1,003			1,328			1,588
Home Lending — PCI loans^(c)	2,225			2,311			2,742
Card	4,884			4,034			3,434
Auto	464			474			399
Student	—			249			299
Total allowance for loan losses^(c)	$	9,372		$	9,149		$	9,165


(a)	Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing.

(b)

At December 31, 2017, 2016 and 2015, nonaccrual loans excluded loans 90 or more days past due as follows: (1) mortgage loans insured by U.S. government agencies of $4.3 billion, $5.0 billion and $6.3 billion, respectively; and (2) student loans insured by U.S. government agencies under the Federal Family Education Loan Program (“FFELP”) of zero, $263 million and $290 million, respectively. These amounts have been excluded based upon the government guarantee.


(c)	Net charge-offs and the net charge-off rates for the years ended December 31, 2017, 2016 and 2015, excluded $86 million, $156 million and $208 million, respectively, of write-offs in the PCI portfolio. These write-offs decreased the allowance for loan losses for PCI loans. For further information on PCI write-offs, see summary of changes in the allowance on page 118.

(d)

Excludes the impact of PCI loans. For the years ended December 31, 2017, 2016 and 2015, the net charge-off rates including the impact of PCI loans were as follows: (1) home equity of 0.14%, 0.34% and 0.45%, respectively; (2) residential mortgage of (0.01)%, 0.01% and –%, respectively; (3) Home Lending of 0.02%, 0.09% and 0.14%, respectively; and (4) total CCB of 1.12%, 0.95% and 0.99%, respectively.


(e)	At December 31, 2017, 2016 and 2015, excluded mortgage loans insured by U.S. government agencies of $6.2 billion, $7.0 billion and $8.4 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.


(f)	Excludes PCI loans. The 30+ day delinquency rate for PCI loans was 10.13%, 9.82% and 11.21% at December 31, 2017, 2016 and 2015, respectively.


(g)	Excluded student loans insured by U.S. government agencies under FFELP of $468 million and $526 million at December 31, 2016 and 2015, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.



Selected metrics
As of or for the year ended December 31,
(in billions, except ratios and where otherwise noted)	2017			2016			2015
Business Metrics
CCB households (in millions)^(a)	61.0			60.4			58.1
Number of branches	5,130			5,258			5,413
Active digital customers (in thousands)^(b)	46,694			43,836			39,242
Active mobile customers (in thousands)^(c)	30,056			26,536			22,810
Debit and credit card sales volume^(a)	$	916.9		$	821.6		$	754.1

Consumer & Business Banking
Average deposits	$	625.6		$	570.8		$	515.2
Deposit margin	1.98		%	1.81		%	1.90		%
Business banking origination volume	$	7.3		$	7.3		$	6.8
Client investment assets	273.3			234.5			218.6

Home Lending
Mortgage origination volume by channel
Retail	$	40.3		$	44.3		$	36.1
Correspondent	57.3			59.3			70.3
Total mortgage origination volume^(d)	$	97.6		$	103.6		$	106.4
Total loans serviced (period-end)	$	816.1		$	846.6		$	910.1
Third-party mortgage loans serviced (period-end)	553.5			591.5			674.0
MSR carrying value (period-end)	6.0			6.1			6.6
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)	1.08		%	1.03		%	0.98		%

MSR revenue multiple^(e)	3.09		x	2.94		x	2.80		x

Card, excluding Commercial Card
Credit card sales volume	$	622.2		$	545.4		$	495.9
New accounts opened (in millions)	8.4			10.4			8.7

Card Services
Net revenue rate	10.57		%	11.29		%	12.33		%

Merchant Services
Merchant processing volume	$	1,191.7		$	1,063.4		$	949.3

Auto
Loan and lease origination volume	$	33.3		$	35.4		$	32.4
Average Auto operating lease assets	15.2			11.0			7.8


(a)	The prior period amounts have been revised to conform with the current period presentation.


(b)	Users of all web and/or mobile platforms who have logged in within the past 90 days.


(c)	Users of all mobile platforms who have logged in within the past 90 days.


(d)	Firmwide mortgage origination volume was $107.6 billion, $117.4 billion and $115.2 billion for the years ended December 31, 2017, 2016 and 2015, respectively.


(e)	Represents the ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) divided by the ratio of loan servicing-related revenue to third-party mortgage loans serviced (average).

The Corporate & Investment Bank, which consists of Banking and Markets & Investor Services, offers a broad suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. Banking offers a full range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. Banking also includes Treasury Services, which provides transaction services, consisting of cash management and liquidity solutions. Markets & Investor Services is a global market-maker in cash securities and derivative instruments, and also offers sophisticated risk management solutions, prime brokerage, and research. Markets & Investor Services also includes Securities Services, a leading global custodian which provides custody, fund accounting and administration, and securities lending products principally for asset managers, insurance companies and public and private investment funds.



Selected income statement data
Year ended December 31,
(in millions)	2017			2016		2015
Revenue
Investment banking fees	$	7,192		$	6,424	$	6,736
Principal transactions	10,873			11,089		9,905
Lending- and deposit-related fees	1,531			1,581		1,573
Asset management, administration and commissions	4,207			4,062		4,467
All other income	572			1,169		1,012
Noninterest revenue	24,375			24,325		23,693
Net interest income	10,118			10,891		9,849
Total net revenue^(a)(b)	34,493			35,216		33,542

Provision for credit losses	(45		)	563		332

Noninterest expense
Compensation expense	9,535			9,546		9,973
Noncompensation expense	9,708			9,446		11,388
Total noninterest expense	19,243			18,992		21,361
Income before income tax expense	15,295			15,661		11,849
Income tax expense	4,482			4,846		3,759
Net income^(a)	$	10,813		$	10,815	$	8,090


(a)	The full year 2017 results reflect the impact of the enactment of the TCJA including a decrease to net revenue of $259 million and a benefit to net income of $141 million. For additional information related to the impact of the TCJA, see Note 24.


(b)	Included tax-equivalent adjustments, predominantly due to income tax credits related to alternative energy investments; income tax credits and amortization of the cost of investments in affordable housing projects; and tax-exempt income from municipal bonds of $2.4 billion, $2.0 billion and $1.7 billion for the years ended December 31, 2017, 2016 and 2015, respectively.



Selected income statement data
Year ended December 31,
(in millions, except ratios)	2017			2016			2015
Financial ratios
Return on equity	14		%	16		%	12		%
Overhead ratio	56			54			64
Compensation expense as percentage of total net revenue	28			27			30
Revenue by business
Investment Banking	$	6,688		$	5,950		$	6,376
Treasury Services	4,172			3,643			3,631
Lending	1,429			1,208			1,461
Total Banking	12,289			10,801			11,468
Fixed Income Markets	12,812			15,259			12,592
Equity Markets	5,703			5,740			5,694
Securities Services	3,917			3,591			3,777
Credit Adjustments & Other^(a)	(228		)	(175		)	11
Total Markets & Investor Services	22,204			24,415			22,074
Total net revenue	$	34,493		$	35,216		$	33,542

(a)

Consists primarily of credit valuation adjustments (“CVA”) managed centrally within CIB, funding valuation adjustments (“FVA”) and debit valuation adjustments (“DVA”) on derivatives. Results are primarily reported in principal transactions revenue. Results are presented net of associated hedging activities and net of CVA and FVA amounts allocated to Fixed Income Markets and Equity Markets. For additional information, see Accounting and Reporting Developments on pages 141–144 and Notes 2, 3 and 23.

2017 compared with 2016

Net income was $10.8 billion, flat compared with the prior year, reflecting lower net revenue and higher noninterest expense, offset by a lower provision for credit losses, and a tax benefit resulting from the vesting of employee share-based awards. The current year included a $141 million benefit to net income as a result of the enactment of the TCJA.

Net revenue was $34.5 billion, down 2%.

Banking revenue was $12.3 billion, up 14% compared with the prior year. Investment banking revenue was $6.7 billion, up 12% from the prior year, driven by higher debt and equity underwriting fees. The Firm maintained its #1 ranking for Global Investment Banking fees, according to Dealogic. Debt underwriting fees were $3.6 billion, up 16% driven by a higher share of fees and an overall increase in industry-wide fees; the Firm maintained its #1 ranking globally in fees across high-grade, high-yield, and loan products. Equity underwriting fees were $1.4 billion, up 20% driven by growth in industry-wide issuance including a strong IPO market; the Firm ranked #2 in equity underwriting fees globally. Advisory fees were $2.2 billion, up 2%; the Firm maintained its #2 ranking for M&A. Treasury Services revenue was $4.2 billion, up 15%, driven by the impact of higher interest rates and growth in operating deposits. Lending revenue was $1.4 billion, up

18% from the prior year, reflecting lower fair value losses on hedges of accrual loans.

Markets & Investor Services revenue was $22.2 billion, down 9% from the prior year. Fixed Income Markets revenue was $12.8 billion, down 16%, as lower revenue across products was driven by sustained low volatility, tighter credit spreads, and the impact from the TCJA on tax-oriented investments of $259 million, against a strong prior year. Equity Markets revenue was $5.7 billion, down 1% from the prior year, and included a fair value loss of $143 million on a margin loan to a single client. Excluding the fair value loss, Equity Markets revenue was higher driven by higher revenue in Prime Services and Cash Equities, partially offset by lower revenue in derivatives. Securities Services revenue was $3.9 billion, up 9%, driven by the impact of higher interest rates and deposit growth, as well as higher asset-based fees driven by higher market levels. Credit Adjustments & Other was a loss of $228 million, driven by valuation adjustments.

The provision for credit losses was a benefit of $45 million, which included a net reduction in the allowance for credit losses driven by the Oil & Gas and Metals & Mining portfolios partially offset by a net increase in the allowance for credit losses for a single client. The prior year was an expense of $563 million, which included an addition to the allowance for credit losses driven by the Oil & Gas and Metals & Mining portfolios.

Noninterest expense was $19.2 billion, up 1% compared with the prior year.

2016 compared with 2015

Net income was $10.8 billion, up 34% compared with the prior year, driven by lower noninterest expense and higher net revenue, partially offset by a higher provision for credit losses.

Banking revenue was $10.8 billion, down 6% compared with the prior year. Investment banking revenue was $6.0 billion, down 7% from the prior year, largely driven by lower equity underwriting fees. The Firm maintained its #1 ranking for Global Investment Banking fees, according to

Dealogic. Equity underwriting fees were $1.2 billion, down 19% driven by lower industry-wide fee levels; however, the Firm improved its market share and maintained its #1 ranking in equity underwriting fees globally as well as in both North America and Europe and its #1 ranking by volumes across all products, according to Dealogic. Advisory fees were $2.1 billion, down 1%; the Firm maintained its #2 ranking for M&A, according to Dealogic. Debt underwriting fees were $3.2 billion; the Firm maintained its #1 ranking globally in fees across high grade, high yield, and loan products, according to Dealogic. Treasury Services revenue was $3.6 billion. Lending revenue was $1.2 billion, down 17% from the prior year, reflecting fair value losses on hedges of accrual loans.

Markets & Investor Services revenue was $24.4 billion, up 11% from the prior year. Fixed Income Markets revenue was $15.3 billion, up 21% from the prior year, driven by broad strength across products. Rates performance was strong, with increased client activity driven by high issuance-based flows, global political developments, and central bank actions. Credit and Securitized Products revenue improved driven by higher market-making revenue from the secondary market as clients’ risk appetite recovered, and due to increased financing activity. Equity Markets revenue was $5.7 billion, up 1%, compared to a strong prior-year. Securities Services revenue was $3.6 billion, down 5% from the prior year, largely driven by lower fees and commissions. Credit Adjustments and Other was a loss of $175 million driven by valuation adjustments, compared with an $11 million gain in the prior-year, which included funding spread gains on fair value option elected liabilities.

The provision for credit losses was $563 million, compared to $332 million in the prior year, reflecting a higher allowance for credit losses, including the impact of select downgrades within the Oil & Gas portfolio.

Noninterest expense was $19.0 billion, down 11% compared with the prior year, driven by lower legal and compensation expenses.



Selected metrics
As of or for the year ended December 31, (in millions, except headcount)
	2017		2016		2015
Selected balance sheet data (period-end)
Assets	$	826,384	$	803,511	$	748,691
Loans:
Loans retained^(a)	108,765		111,872		106,908
Loans held-for-sale and loans at fair value	4,321		3,781		3,698
Total loans	113,086		115,653		110,606
Core loans	112,754		115,243		110,084
Equity	70,000		64,000		62,000
Selected balance sheet data (average)
Assets	$	857,060	$	815,321	$	824,208
Trading assets-debt and equity instruments	342,124		300,606		302,514
Trading assets-derivative receivables	56,466		63,387		67,263
Loans:
Loans retained^(a)	108,368		111,082		98,331
Loans held-for-sale and loans at fair value	4,995		3,812		4,572
Total loans	113,363		114,894		102,903
Core loans	113,006		114,455		102,142
Equity	70,000		64,000		62,000

Headcount	51,181		48,748		49,067


(a)	Loans retained includes credit portfolio loans, loans held by consolidated Firm-administered multi-seller conduits, trade finance loans, other held-for-investment loans and overdrafts.



Selected metrics
As of or for the year ended December 31, (in millions, except ratios)
	2017			2016			2015
Credit data and quality statistics
Net charge-offs/(recoveries)	$	71		$	168		$	(19	)
Nonperforming assets:
Nonaccrual loans:
Nonaccrual loans retained^(a)	812			467			428
Nonaccrual loansheld-for-sale and loans at fair value	—			109			10
Total nonaccrual loans	812			576			438
Derivative receivables	130			223			204
Assets acquired in loan satisfactions	85			79			62
Total nonperforming assets	1,027			878			704
Allowance for credit losses:
Allowance for loan losses	1,379			1,420			1,258
Allowance for lending-related commitments	727			801			569
Total allowance for credit losses	2,106			2,221			1,827
Net charge-off/(recovery) rate^(b)	0.07		%	0.15		%	(0.02		)%
Allowance for loan losses to period-end loans retained	1.27			1.27			1.18
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits^(c)	1.92			1.86			1.88
Allowance for loan losses to nonaccrual loans retained^(a)	170			304			294
Nonaccrual loans to total period-end loans	0.72			0.50			0.40


(a)	Allowance for loan losses of $316 million, $113 million and $177 million were held against these nonaccrual loans at December 31, 2017, 2016 and 2015, respectively.


(b)	Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.


(c)	Management uses allowance for loan losses to period-end loans retained, excluding trade finance and conduits, a non-GAAP financial measure, to provide a more meaningful assessment of CIB’s allowance coverage ratio.

The following table summarizes select income statement data for the Markets businesses. Markets includes both Fixed Income Markets and Equity Markets. Markets revenue consists of principal transactions, fees, commissions and other income, as well as net interest income. The Firm assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate net interest income may be risk-managed by derivatives that are recorded in principal transactions. For a description of the composition of these income statement line items, see Notes 6 and 7.

Principal transactions reflects revenue on financial instruments and commodities transactions that arise from client-driven market making activity. Principal transactions revenue includes amounts recognized upon executing new transactions with market participants, as well as “inventory-related revenue”, which is revenue recognized from gains and losses on derivatives and other instruments that the

Firm has been holding in anticipation of, or in response to, client demand, and changes in the fair value of instruments used by the Firm to actively manage the risk exposure arising from such inventory. Principal transactions revenue recognized upon executing new transactions with market participants is driven by many factors including the level of client activity, the bid-offer spread (which is the difference between the price at which a market participant is willing to sell an instrument to the Firm and the price at which another market participant is willing to buy it from the Firm, and vice versa), market liquidity and volatility. These factors are interrelated and sensitive to the same factors that drive inventory-related revenue, which include general market conditions, such as interest rates, foreign exchange rates, credit spreads, and equity and commodity prices, as well as other macroeconomic conditions.

For the periods presented below, the predominant source of principal transactions revenue was the amount recognized upon executing new transactions.



International metrics
Year ended December 31,
(in millions, except where otherwise noted)	2017		2016		2015
Total net revenue^(a)
Europe/Middle East/Africa	$	11,328	$	10,786	$	10,894
Asia/Pacific	4,525		4,915		4,901
Latin America/Caribbean	1,125		1,225		1,096
Total international net revenue	16,978		16,926		16,891
North America	17,515		18,290		16,651
Total net revenue	$	34,493	$	35,216	$	33,542

Loans retained (period-end)^(a)
Europe/Middle East/Africa	$	25,931	$	26,696	$	24,622
Asia/Pacific	15,248		14,508		17,108
Latin America/Caribbean	6,546		7,607		8,609
Total international loans	47,725		48,811		50,339
North America	61,040		63,061		56,569
Total loans retained	$	108,765	$	111,872	$	106,908

Client deposits and other third-party liabilities (average)^(a)(b)
Europe/Middle East/Africa	$	154,582	$	135,979	$	141,062
Asia/Pacific	76,744		68,110		67,111
Latin America/Caribbean	25,419		22,914		23,070
Total international	$	256,745	$	227,003	$	231,243
North America	152,166		149,284		164,054
Total client deposits and other third-party liabilities	$	408,911	$	376,287	$	395,297

AUC (period-end) (in billions)^(a)
North America	$	13,971	$	12,290	$	12,034
All other regions	9,498		8,230		7,909
Total AUC	$	23,469	$	20,520	$	19,943


(a)	Total net revenue is based predominantly on the domicile of the client or location of the trading desk, as applicable. Loans outstanding (excluding loans held-for-sale and loans at fair value), client deposits and other third-party liabilities, and AUC are based predominantly on the domicile of the client.


(b)	Client deposits and other third party liabilities pertain to the Treasury Services and Securities Services businesses.

Commercial Banking delivers extensive industry knowledge, local expertise and dedicated service to U.S. and U.S. multinational clients, including corporations, municipalities, financial institutions and nonprofit entities with annual revenue generally ranging from $20 million to $2 billion. In addition, CB provides financing to real estate investors and owners. Partnering with the Firm’s other businesses, CB provides comprehensive financial solutions, including lending, treasury services, investment banking and asset management to meet its clients’ domestic and international financial needs.



Selected income statement data
Year ended December 31, (in millions)	2017			2016		2015
Revenue
Lending- and deposit-related fees	$	919		$	917	$	944
Asset management, administration and commissions	68			69		88
All other income^(a)	1,535			1,334		1,333
Noninterest revenue	2,522			2,320		2,365
Net interest income	6,083			5,133		4,520
Total net revenue^(b)	8,605			7,453		6,885

Provision for credit losses	(276		)	282		442

Noninterest expense
Compensation expense	1,470			1,332		1,238
Noncompensation expense	1,857			1,602		1,643
Total noninterest expense	3,327			2,934		2,881

Income before income tax expense	5,554			4,237		3,562
Income tax expense	2,015			1,580		1,371
Net income	$	3,539		$	2,657	$	2,191


(a)	Includes revenue from investment banking products and commercial card transactions.

(b)

Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities that provide loans to qualified businesses in low-income communities, as well as tax-exempt income related to municipal financing activities of $699 million, $505 million and $493 million for the years ended December 31, 2017, 2016 and 2015, respectively. The 2017 results reflect the impact of the enactment of the TCJA including a benefit to all other income of $115 million on certain investments in the Community Development Banking business. For additional information related to the impact of the TCJA, see Note 24.

2017 compared with 2016

Net income was $3.5 billion, an increase of 33% compared with the prior year, driven by higher net revenue and a lower provision for credit losses, partially offset by higher noninterest expense.

Net revenue was $8.6 billion, an increase of 15% compared with the prior year. Net interest income was $6.1 billion, an increase of 19% compared with the prior year, driven by higher deposit spreads and loan growth. Noninterest revenue was $2.5 billion, an increase of 9% compared with the prior year, predominantly driven by higher Community Development Banking revenue, including a $115 million benefit for the impact of the TCJA on certain investments, and higher investment banking revenue.

Noninterest expense was $3.3 billion, an increase of 13% driven by hiring of bankers and business-related support staff, investments in technology, and an impairment of approximately $130 million on certain leased equipment, the majority of which was sold subsequent to year-end.

The provision for credit losses was a benefit of $276 million, driven by net reductions in the allowance for credit

losses, including in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios. The prior year provision for credit losses was $282 million driven by downgrades in the Oil & Gas portfolio and select client downgrades in other industries.

2016 compared with 2015

Net income was $2.7 billion, an increase of 21% compared with the prior year, driven by higher net revenue and a lower provision for credit losses, partially offset by higher noninterest expense.

Net revenue was $7.5 billion, an increase of 8% compared with the prior year. Net interest income was $5.1 billion, an increase of 14% compared with the prior year, driven by higher loan balances and deposit spreads. Noninterest revenue was $2.3 billion, a decrease of 2% compared with the prior year, largely driven by lower lending-and-deposit-related fees and other revenue, partially offset by higher investment banking revenue.

Noninterest expense was $2.9 billion, an increase of 2% compared with the prior year, reflecting increased hiring of bankers and business-related support staff and investments in technology.

The provision for credit losses was $282 million and $442 million for 2016 and 2015, respectively, with both periods driven by downgrades in the Oil & Gas portfolio and select client downgrades in other industries.



CB product revenue consists of the following:
Lending includes a variety of financing alternatives, which are primarily provided on a secured basis; collateral includes receivables, inventory, equipment, real estate or other assets. Products include term loans, revolving lines of credit, bridge financing, asset-based structures, leases, and standby letters of credit.
Treasury services includes revenue from a broad range of products and services that enable CB clients to manage payments and receipts, as well as invest and manage funds.
Investment banking includes revenue from a range of products providing CB clients with sophisticated capital-raising alternatives, as well as balance sheet and risk management tools through advisory, equity underwriting, and loan syndications. Revenue from Fixed Income and Equity Markets products used by CB clients is also included.
Other product revenue primarily includes tax-equivalent adjustments generated from Community Development Banking activities and certain income derived from principal transactions.



CB is divided into four primary client segments: Middle Market Banking, Corporate Client Banking, Commercial Term Lending, and Real Estate Banking.
Middle Market Banking covers corporate, municipal and nonprofit clients, with annual revenue generally ranging between $20 million and $500 million.
Corporate Client Banking covers clients with annual revenue generally ranging between $500 million and $2 billion and focuses on clients that have broader investment banking needs.
Commercial Term Lending primarily provides term financing to real estate investors/owners for multifamily properties as well as office, retail and industrial properties.
Real Estate Banking provides full-service banking to investors and developers of institutional-grade real estate investment properties.
Other primarily includes lending and investment-related activities within the Community Development Banking business.



Selected income statement data (continued)
Year ended December 31, (in millions, except ratios)	2017			2016			2015
Revenue by product
Lending	$	4,094		$	3,795		$	3,429
Treasury services	3,444			2,797			2,581
Investment banking^(a)	805			785			730
Other^(b)	262			76			145
Total Commercial Banking net revenue	$	8,605		$	7,453		$	6,885

Investment banking revenue, gross^(c)	$	2,327		$	2,286		$	2,179

Revenue by client segment
Middle Market Banking^(d)	$	3,341		$	2,848		$	2,685
Corporate Client Banking^(d)	2,727			2,429			2,205
Commercial Term Lending	1,454			1,408			1,275
Real Estate Banking	604			456			358
Other^(b)	479			312			362
Total Commercial Banking net revenue	$	8,605		$	7,453		$	6,885

Financial ratios
Return on equity	17		%	16		%	15		%
Overhead ratio	39			39			42


(a)	Includes total Firm revenue from investment banking products sold to CB clients, net of revenue sharing with the CIB.


(b)	The 2017 results reflect the impact of the enactment of the TCJA including a benefit of $115 million on certain investments in the Community Development Banking business. For additional information related to the impact of the TCJA, see Note 24.


(c)	Represents total Firm revenue from investment banking products sold to CB clients.


(d)	Certain clients were transferred from Middle Market Banking to Corporate Client Banking in the second quarter of 2017. The prior period amounts have been revised to conform with the current period presentation.



Selected metrics
As of or for the year ended December 31, (in millions, except headcount)	2017		2016		2015
Selected balance sheet data (period-end)
Total assets	$	221,228	$	214,341	$	200,700
Loans:
Loans retained	202,400		188,261		167,374
Loans held-for-sale and loans at fair value	1,286		734		267
Total loans	$	203,686	$	188,995	$	167,641
Core loans	203,469		188,673		166,939
Equity	20,000		16,000		14,000

Period-end loans by client segment
Middle Market Banking^(a)	$	56,965	$	53,929	$	50,501
Corporate Client Banking^(a)	46,963		43,027		37,709
Commercial Term Lending	74,901		71,249		62,860
Real Estate Banking	17,796		14,722		11,234
Other	7,061		6,068		5,337
Total Commercial Banking loans	$	203,686	$	188,995	$	167,641

Selected balance sheet data (average)
Total assets	$	217,047	$	207,532	$	198,076
Loans:
Loans retained	197,203		178,670		157,389
Loans held-for-sale and loans at fair value	909		723		492
Total loans	$	198,112	$	179,393	$	157,881
Core loans	197,846		178,875		156,975
Client deposits and other third-party liabilities	177,018		174,396		191,529
Equity	20,000		16,000		14,000

Average loans by client segment
Middle Market Banking^(a)	$	55,474	$	52,242	$	50,334
Corporate Client Banking^(a)	46,037		41,756		34,497
Commercial Term Lending	73,428		66,700		58,138
Real Estate Banking	16,525		13,063		9,917
Other	6,648		5,632		4,995
Total Commercial Banking loans	$	198,112	$	179,393	$	157,881

Headcount	9,005		8,365		7,845


(a)	Certain clients were transferred from Middle Market Banking to Corporate Client Banking in the second quarter of 2017. The prior period amounts have been revised to conform with the current period presentation.



Selected metrics
As of or for the year ended December 31, (in millions, except ratios)	2017			2016			2015
Credit data and quality statistics
Net charge-offs/(recoveries)	$	39		$	163		$	21
Nonperforming assets
Nonaccrual loans:
Nonaccrual loans retained^(a)	617			1,149			375
Nonaccrual loans held-for-sale and loans at fair value	—			—			18
Total nonaccrual loans	617			1,149			393

Assets acquired in loan satisfactions	3			1			8
Total nonperforming assets	620			1,150			401
Allowance for credit losses:
Allowance for loan losses	2,558			2,925			2,855
Allowance for lending-related commitments	300			248			198
Total allowance for credit losses	2,858			3,173			3,053

Net charge-off/(recovery) rate^(b)	0.02		%	0.09		%	0.01		%
Allowance for loan losses to period-end loansretained	1.26			1.55			1.71
Allowance for loan losses to nonaccrual loans retained^(a)	415			255			761
Nonaccrual loans to period-end total loans	0.30			0.61			0.23


(a)	Allowance for loan losses of $92 million, $155 million and $64 million was held against nonaccrual loans retained at December 31, 2017, 2016 and 2015, respectively.


(b)	Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.

Asset & Wealth Management, with client assets of $2.8 trillion, is a global leader in investment and wealth management. AWM clients include institutions, high-net-worth individuals and retail investors in many major markets throughout the world. AWM offers investment management across most major asset classes including equities, fixed income, alternatives and money market funds. AWM also offers multi-asset investment management, providing solutions for a broad range of clients’ investment needs. For Wealth Management clients, AWM also provides retirement products and services, brokerage and banking services including trusts and estates, loans, mortgages and deposits. The majority of AWM’s client assets are in actively managed portfolios.



Selected income statement data
Year ended December 31, (in millions, except ratios and headcount)	2017			2016			2015
Revenue
Asset management, administration and commissions	$	8,946		$	8,414		$	9,175
All other income	593			598			388
Noninterest revenue	9,539			9,012			9,563
Net interest income	3,379			3,033			2,556
Total net revenue	12,918			12,045			12,119

Provision for credit losses	39			26			4

Noninterest expense
Compensation expense	5,318			5,065			5,113
Noncompensation expense	3,983			3,413			3,773
Total noninterest expense	9,301			8,478			8,886

Income before income tax expense	3,578			3,541			3,229
Income tax expense	1,241			1,290			1,294
Net income	$	2,337		$	2,251		$	1,935

Revenue by line of business
Asset Management	$	6,340		$	5,970		$	6,301
Wealth Management	6,578			6,075			5,818
Total net revenue	$	12,918		$	12,045		$	12,119

Financial ratios
Return on common equity	25		%	24		%	21		%
Overhead ratio	72			70			73
Pre-tax margin ratio:
Asset Management	25			31			31
Wealth Management	30			28			22
Asset & Wealth Management	28			29			27

Headcount	22,975			21,082			20,975

Number of Wealth Management client advisors	2,605			2,504			2,778

2017 compared with 2016

Net income was $2.3 billion, an increase of 4% compared with the prior year, reflecting higher revenue and a tax benefit resulting from the vesting of employee share-based awards, offset by higher noninterest expense.

Net revenue was $12.9 billion, an increase of 7%. Net interest income was $3.4 billion, up 11%, driven by higher deposit spreads. Noninterest revenue was $9.5 billion, up 6%, driven by higher market levels, partially offset by the absence of a gain in the prior year on the disposal of an asset.

Revenue from Asset Management was $6.3 billion, up 6% from the prior year, driven by higher market levels, partially offset by the absence of a gain in prior year on the disposal of an asset. Revenue from Wealth Management was $6.6 billion, up 8% from the prior year, reflecting higher net interest income from higher deposit spreads.

Noninterest expense was $9.3 billion, an increase of 10%, predominantly driven by higher legal expense and compensation expense on higher revenue and headcount.

2016 compared with 2015

Net income was $2.3 billion, a decrease of 16% compared with the prior year, reflecting lower noninterest expense, predominantly offset by lower net revenue.

Net revenue was $12.0 billion, a decrease of 1%. Net interest income was $3.0 billion, up 19%, driven by higher loan balances and spreads. Noninterest revenue was $9.0 billion, a decrease of 6%, reflecting the impact of lower average equity market levels, a reduction in revenue related to the disposal of assets at the beginning of 2016, and lower performance fees and placement fees.

Revenue from Asset Management was $6.0 billion, down 5% from the prior year, driven by a reduction in revenue related to the disposal of assets at the beginning of 2016, the impact of lower average equity market levels and lower performance fees. Revenue from Wealth Management was $6.1 billion, up 4% from the prior year, reflecting higher net interest income from higher deposit and loan spreads and continued loan growth, partially offset by the impact of lower average equity market levels and lower placement fees.

Noninterest expense was $8.5 billion, a decrease of 5%, predominantly due to a reduction in expense related to the disposal of assets at the beginning of 2016 and lower legal expense.



AWM’s lines of business consist of the following:
Asset Management provides comprehensive global investment services, including asset management, pension analytics, asset-liability management and active risk-budgeting strategies.
Wealth Management offers investment advice and wealth management, including investment management, capital markets and risk management, tax and estate planning, banking, lending and specialty-wealth advisory services.



AWM’s client segments consist of the following:
Private Banking clients include high- and ultra-high-net-worth individuals, families, money managers, business owners and small corporations worldwide.
Institutional clients include both corporate and public institutions, endowments, foundations, nonprofit organizations and governments worldwide.
Retail clients include financial intermediaries and individual investors.



Asset Management has two high-level measures of its overall fund performance.
• Percentage of mutual fund assets under management in funds rated 4- or 5-star: Mutual fund rating services rank funds based on their risk-adjusted performance over various periods. A 5-star rating is the best rating and represents the top 10% of industry-wide ranked funds. A 4-star rating represents the next 22.5% of industry-wide ranked funds. A 3-star rating represents the next 35% of industry-wide ranked funds. A 2-star rating represents the next 22.5% of industry-wide ranked funds. A 1-star rating is the worst rating and represents the bottom 10% of industry-wide ranked funds. The “overall Morningstar rating” is derived from a weighted average of the performance associated with a fund’s three-, five- and ten-year (if applicable) Morningstar Rating metrics. For U.S. domiciled funds, separate star ratings are given at the individual share class level. The Nomura “star rating” is based on three-year risk-adjusted performance only. Funds with fewer than three years of history are not rated and hence excluded from this analysis. All ratings, the assigned peer categories and the asset values used to derive this analysis are sourced from these fund rating providers mentioned in footnote (a). The data providers re-denominate the asset values into U.S. dollars. This % of AUM is based on star ratings at the share class level for U.S. domiciled funds, and at a “primary share class” level to represent the star rating of all other funds except for Japan where Nomura provides ratings at the fund level. The “primary share class”, as defined by Morningstar, denotes the share class recommended as being the best proxy for the portfolio and in most cases will be the most retail version (based upon annual management charge, minimum investment, currency and other factors). The performance data could have been different if all funds/accounts would have been included. Past performance is not indicative of future results.
• Percentage of mutual fund assets under management in funds ranked in the 1st or 2nd quartile (one, three and five years): All quartile rankings, the assigned peer categories and the asset values used to derive this analysis are sourced from the fund ranking providers mentioned in footnote (c). Quartile rankings are done on the net-of-fee absolute return of each fund. The data providers re-denominate the asset values into U.S. dollars. This % of AUM is based on fund performance and associated peer rankings at the share class level for U.S. domiciled funds, at a “primary share class” level to represent the quartile ranking of the U.K., Luxembourg and Hong Kong funds and at the fund level for all other funds. The “primary share class”, as defined by Morningstar, denotes the share class recommended as being the best proxy for the portfolio and in most cases will be the most retail version (based upon annual management charge, minimum investment, currency and other factors). Where peer group rankings given for a fund are in more than one “primary share class” territory both rankings are included to reflect local market competitiveness (applies to “Offshore Territories” and “HK SFC Authorized” funds only). The performance data could have been different if all funds/accounts would have been included. Past performance is not indicative of future results.



Selected metrics
As of or for the year ended December 31, (in millions, except ranking data and ratios)	2017			2016			2015
% of JPM mutual fund assets rated as 4- or 5-star^(a)(b)	60		%	63		%	52		%
% of JPM mutual fund assets ranked in 1^st or 2^nd quartile:^(c)
1 year	64			54			62
3 years	75			72			78
5 years^(b)	83			79			79

Selected balance sheet data (period-end)
Total assets	$	151,909		$	138,384		$	131,451
Loans	130,640			118,039			111,007
Core loans	130,640			118,039			111,007
Deposits	146,407			161,577			146,766
Equity	9,000			9,000			9,000

Selected balance sheet data (average)
Total assets	$	144,206		$	132,875		$	129,743
Loans	123,464			112,876			107,418
Core loans	123,464			112,876			107,418
Deposits	148,982			153,334			149,525
Equity	9,000			9,000			9,000

Credit data and quality statistics
Net charge-offs	$	14		$	16		$	12
Nonaccrual loans	375			390			218
Allowance for credit losses:
Allowance for loan losses	290			274			266
Allowance for lending-related commitments	10			4			5
Total allowance for credit losses	300			278			271
Net charge-off rate	0.01		%	0.01		%	0.01		%
Allowance for loan losses to period-end loans	0.22			0.23			0.24
Allowance for loan losses to nonaccrual loans	77			70			122
Nonaccrual loans to period-end loans	0.29			0.33			0.20


(a)	Represents the “overall star rating” derived from Morningstar for the U.S., the U.K., Luxembourg, Hong Kong and Taiwan domiciled funds; and Nomura “star rating” for Japan domiciled funds. Includes only Asset Management retail open-ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.


(b)	The prior period amounts have been revised to conform with the current period presentation.

(c)

Quartile ranking sourced from: Lipper for the U.S. and Taiwan domiciled funds; Morningstar for the U.K., Luxembourg and Hong Kong domiciled funds; Nomura for Japan domiciled funds and Fund Doctor for South Korea domiciled funds. Includes only Asset Management retail open-ended mutual funds that are ranked by the aforementioned sources. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.

Client assets

2017 compared with 2016

Client assets were $2.8 trillion, an increase of 14% compared with the prior year. Assets under management were $2.0 trillion, an increase of 15% from the prior year reflecting higher market levels, and net inflows into long-term and liquidity products.

2016 compared with 2015

Client assets were $2.5 trillion, an increase of 4% compared with the prior year. Assets under management were $1.8 trillion, an increase of 3% from the prior year reflecting inflows into both liquidity and long-term products and the effect of higher market levels, partially offset by asset sales at the beginning of 2016.



Client assets
December 31, (in billions)	2017		2016		2015
Assets by asset class
Liquidity^(a)	$	459	$	436	$	430
Fixed income^(a)	474		420		376
Equity	428		351		353
Multi-asset and alternatives	673		564		564
Total assets under management	2,034		1,771		1,723
Custody/brokerage/ administration/deposits	755		682		627
Total client assets	$	2,789	$	2,453	$	2,350

Memo:
Alternatives client assets^(b)	$	166	$	154	$	172

Assets by client segment
Private Banking	$	526	$	435	$	437
Institutional	968		869		816
Retail	540		467		470
Total assets under management	$	2,034	$	1,771	$	1,723

Private Banking	$	1,256	$	1,098	$	1,050
Institutional	990		886		824
Retail	543		469		476
Total client assets	$	2,789	$	2,453	$	2,350


(a)	The prior period amounts have been revised to conform with the current period presentation.


(b)	Represents assets under management, as well as client balances in brokerage accounts.



Client assets (continued)
Year ended December 31, (in billions)	2017			2016			2015
Assets under management rollforward
Beginning balance	$	1,771		$	1,723		$	1,744
Net asset flows:
Liquidity	9			24			—
Fixed income	36			30			(8		)
Equity	(11		)	(29		)	1
Multi-asset and alternatives	43			22			22
Market/performance/other impacts	186			1			(36		)
Ending balance, December 31	$	2,034		$	1,771		$	1,723

Client assets rollforward
Beginning balance	$	2,453		$	2,350		$	2,387
Net asset flows	93			63			27
Market/performance/other impacts	243			40			(64		)
Ending balance, December 31	$	2,789		$	2,453		$	2,350



International metrics
Year ended December 31, (in billions, except where otherwise noted)	2017		2016		2015
Total net revenue (in millions)^(a)
Europe/Middle East/Africa	$	2,021	$	1,849	$	1,946
Asia/Pacific	1,162		1,077		1,130
Latin America/Caribbean	844		726		795
Total international net revenue	4,027		3,652		3,871

North America	8,891		8,393		8,248
Total net revenue	$	12,918	$	12,045	$	12,119

Assets under management
Europe/Middle East/Africa	$	384	$	309	$	302
Asia/Pacific	160		123		123
Latin America/Caribbean	61		45		45
Total international assets under management	605		477		470

North America	1,429		1,294		1,253
Total assets under management	$	2,034	$	1,771	$	1,723

Client assets
Europe/Middle East/Africa	$	441	$	359	$	351
Asia/Pacific	225		177		173
Latin America/Caribbean	154		114		110
Total international client assets	820		650		634

North America	1,969		1,803		1,716
Total client assets	$	2,789	$	2,453	$	2,350


(a)	Regional revenue is based on the domicile of the client.

The Corporate segment consists of Treasury and Chief Investment Office and Other Corporate, which includes corporate staff units and expense that is centrally managed. Treasury and CIO is predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding and structural interest rate and foreign exchange risks, as well as executing the Firm’s capital plan. The major Other Corporate units include Real Estate, Enterprise Technology, Legal, Finance, Human Resources, Internal Audit, Risk Management, Compliance, Oversight & Controls, Corporate Responsibility and various Other Corporate groups.



Selected income statement data
Year ended December 31, (in millions, except headcount)	2017			2016			2015
Revenue
Principal transactions	$	284		$	210		$	41
Securities gains/(losses)	(66		)	140			190
All other income/(loss)^(a)	867			588			569
Noninterest revenue	1,085			938			800
Net interest income	55			(1,425		)	(533		)
Total net revenue^(b)	1,140			(487		)	267

Provision for credit losses	—			(4		)	(10		)

Noninterest expense^(c)	501			462			977
Income/(loss) before income tax benefit	639			(945		)	(700		)
Income tax expense/(benefit)	2,282			(241		)	(3,137		)
Net income/(loss)	$	(1,643	)	$	(704	)	$	2,437
Total net revenue
Treasury and CIO	566			(787		)	(493		)
Other Corporate	574			300			760
Total net revenue	$	1,140		$	(487	)	$	267
Net income/(loss)
Treasury and CIO	60			(715		)	(235		)
Other Corporate	(1,703		)	11			2,672
Total net income/(loss)	$	(1,643	)	$	(704	)	$	2,437

Total assets (period-end)	$	781,478		$	799,426		$	768,204
Loans (period-end)	1,653			1,592			2,187
Core loans^(d)	1,653			1,589			2,182
Headcount	35,261			32,358			29,617


(a)	Included revenue related to a legal settlement of $645 million for the year ended December 31, 2017.


(b)	Included tax-equivalent adjustments, predominantly due to tax-exempt income from municipal bond investments of $905 million, $885 million and $839 million for the years ended December 31, 2017, 2016 and 2015, respectively.


(c)	Included legal expense/(benefit) of $(593) million, $(385) million and $832 million for the years ended December 31, 2017, 2016 and 2015, respectively.


(d)	Average core loans were $1.6 billion, $1.9 billion and $2.5 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

2017 compared with 2016

Net loss was $1.6 billion, compared with a net loss of $704 million in the prior year. The current year net loss included a $2.7 billion increase to income tax expense related to the impact of the TCJA.

Net revenue was $1.1 billion, compared with a loss of $487 million in the prior year. The increase in current year net revenue was driven by a $645 million benefit from a legal settlement with the FDIC receivership for Washington Mutual and with Deutsche Bank as trustee of certain Washington Mutual trusts and by the net impact of higher interest rates.

Net interest income was $55 million, compared with a loss of $1.4 billion in the prior year. The gain in the current year was primarily driven by higher interest income on deposits with banks due to higher interest rates and balances, partially offset by higher interest expense on long-term debt primarily driven by higher interest rates.

2016 compared with 2015

Net loss was $704 million, compared with net income of $2.4 billion in the prior year.

Net revenue was a loss of $487 million, compared with a gain of $267 million in the prior year. The prior year included a $514 million benefit from a legal settlement.

Net interest income was a loss of $1.4 billion, compared with a loss of $533 million in the prior year. The loss in the current year was primarily driven by higher interest expense on long-term debt and lower investment securities balances during the year, partially offset by higher interest income on deposits with banks and securities purchased under resale agreements as a result of higher interest rates.

Noninterest expense was $462 million, a decrease of $515 million from the prior year driven by lower legal expense, partially offset by higher compensation expense.

The prior year reflected tax benefits of $2.6 billion predominantly from the resolution of various tax audits.

Treasury and CIO is predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding and structural interest rate and foreign exchange risks, as well as executing the Firm’s capital plan. The risks managed by Treasury and CIO arise from the activities undertaken by the Firm’s four major reportable business segments to serve their respective client bases, which generate both on- and off-balance sheet assets and liabilities.

Treasury and CIO seek to achieve the Firm’s asset-liability management objectives generally by investing in high-quality securities that are managed for the longer-term as part of the Firm’s investment securities portfolio. Treasury and CIO also use derivatives to meet the Firm’s asset-liability management objectives. For further information on derivatives, see Note 5. The investment securities portfolio primarily consists of agency and nonagency mortgage-backed securities, U.S. and non-U.S. government securities, obligations of U.S. states and municipalities, other ABS and corporate debt securities. At December 31, 2017, the investment securities portfolio was $248.0 billion, and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available and where not available, based primarily upon internal ratings that correspond to ratings as defined by S&P and Moody’s). See Note 10 for further information on the details of the Firm’s investment securities portfolio.

For further information on liquidity and funding risk, see Liquidity Risk Management on pages 92–97. For information on interest rate, foreign exchange and other risks, see Market Risk Management on pages 121-128.



Selected income statement and balance sheet data
As of or for the year ended December 31, (in millions)	2017			2016		2015
Securities gains/(losses)	$	(78	)	$	132	$	190
AFS investment securities (average)	219,345			226,892		264,758
HTM investment securities (average)	47,927			51,358		50,044
Investment securities portfolio (average)	267,272			278,250		314,802
AFS investment securities (period-end)	200,247			236,670		238,704
HTM investment securities (period-end)	47,733			50,168		49,073
Investment securities portfolio (period–end)	247,980			286,838		287,777

Risk is an inherent part of JPMorgan Chase’s business activities. When the Firm extends a consumer or wholesale loan, advises customers on their investment decisions, makes markets in securities, or offers other products or services, the Firm takes on some degree of risk. The Firm’s overall objective is to manage its businesses, and the associated risks, in a manner that balances serving the interests of its clients, customers and investors and protects the safety and soundness of the Firm.

The Firm believes that effective risk management requires:


•	Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm;


•	Ownership of risk identification, assessment, data and management within each of the lines of business and corporate functions; and


•	Firmwide structures for risk governance.

The Firm strives for continual improvement through efforts to enhance controls, ongoing employee training and development, talent retention, and other measures. The Firm follows a disciplined and balanced compensation framework with strong internal governance and independent Board oversight. The impact of risk and control issues are carefully considered in the Firm’s performance evaluation and incentive compensation processes.

Firmwide Risk Management is overseen and managed on an enterprise-wide basis. The Firm’s approach to risk management involves understanding drivers of risks, risk types, and impacts of risks.

Drivers of risk include, but are not limited to, the economic environment, regulatory or government policy, competitor or market evolution, business decisions, process or judgment error, deliberate wrongdoing, dysfunctional markets, and natural disasters.

The Firm’s risks are generally categorized in the following four risk types:


•	Strategic risk is the risk associated with the Firm’s current and future business plans and objectives, including capital risk, liquidity risk, and the impact to the Firm’s reputation.


•	Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments, including consumer credit risk, wholesale credit risk, and investment portfolio risk.


•	Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.


•	Operational risk is the risk associated with inadequate or failed internal processes, people and systems, or from external events and includes compliance risk, conduct risk, legal risk, and estimations and model risk.

There may be many consequences of risks manifesting, including quantitative impacts such as reduction in earnings and capital, liquidity outflows, and fines or penalties, or qualitative impacts, such as reputation damage, loss of clients, and regulatory and enforcement actions.



Risk Oversight	Definition	Page references
Strategic risk	The risk associated with the Firm’s current and future business plans and objectives.	81
Capital risk	The risk that the Firm has an insufficient level and composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions.	82–91
Liquidity risk	The risk that the Firm will be unable to meet its contractual and contingent financial obligations as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities.	92–97
Reputation risk	The potential that an action, inaction, transaction, investment or event will reduce trust in the Firm’s integrity or competence by its various constituents, including clients, counterparties, investors, regulators, employees and the broader public.	98
Consumer credit risk	The risk associated with the default or change in credit profile of a customer.	102–107
Wholesale credit risk	The risk associated with the default or change in credit profile of a client or counterparty.	108–116
Investment portfolio risk	The risk associated with the loss of principal or a reduction in expected returns on investments arising from the investment securities portfolio held by Treasury and CIO in connection with the Firm’s balance sheet or asset-liability management objectives or from principal investments managed in various lines of business in predominantly privately-held financial assets and instruments.	120
Market risk	The risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.	121–128
Country risk	The framework for monitoring and assessing how financial, economic, political or other significant developments adversely affect the value of the Firm’s exposures related to a particular country or set of countries.	129–130
Operational risk	The risk associated with inadequate or failed internal processes, people and systems, or from external events.	131–133
Compliance risk	The risk of failure to comply with applicable laws, rules, and regulations.	134
Conduct risk	The risk that any action or inaction by an employee of the Firm could lead to unfair client/customer outcomes, compromise the Firm’s reputation, impact the integrity of the markets in which the Firm operates, or reflect poorly on the Firm’s culture.	135
Legal risk	The risk of loss primarily caused by the actual or alleged failure to meet legal obligations that arise from the rule of law in jurisdictions in which the Firm operates, agreements with clients and customers, and products and services offered by the Firm.	136
Estimations and Model risk	The risk of the potential for adverse consequences from decisions based on incorrect or misused estimation outputs.	137

The Firm’s overall appetite for risk is governed by a “Risk Appetite” framework. The framework and the Firm’s risk appetite are set and approved by the Firm’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Risk Officer (“CRO”). LOB-level risk appetite is set by the respective LOB CEO, CFO and CRO and is approved by the Firm’s CEO, CFO and CRO. Quantitative parameters and qualitative factors are used to monitor and measure the Firm’s capacity to take risk consistent with its stated risk appetite. Quantitative parameters have been established to assess select strategic risks, credit risks and market risks. Qualitative factors have been established for select operational risks, and for reputation risks. Risk Appetite results are reported quarterly to the Board of Directors’ Risk Policy Committee (“DRPC”).

The Firm has an Independent Risk Management (“IRM”) function, which consists of the Risk Management and Compliance organizations. The CEO appoints, subject to DRPC approval, the Firm’s CRO to lead the IRM organization and manage the risk governance framework of the Firm. The framework is subject to approval by the DRPC in the form of the primary risk management policies. The Chief Compliance Officer (“CCO”), who reports to the CRO, is also responsible for reporting to the Audit Committee for the Global Compliance Program. The Firm’s Global Compliance Program focuses on overseeing compliance with laws, rules and regulations applicable to the Firm’s products and services to clients and counterparties.

The Firm places reliance on each of its LOBs and other functional areas giving rise to risk. Each LOB and other functional area giving rise to risk is expected to operate within the parameters identified by the IRM function, and within its own management-identified risk and control standards. The LOBs, inclusive of LOB aligned Operations, Technology and Oversight & Controls, are the “first line of defense” in identifying and managing the risk in their activities, including but not limited to applicable laws, rules and regulations.

The IRM function is independent of the businesses and forms “the second line of defense”. The IRM function sets and oversees various standards for the risk governance framework, including risk policy, identification, measurement, assessment, testing, limit setting, monitoring and reporting, and conducts independent challenge of adherence to such standards.

The Internal Audit function operates independently from other parts of the Firm and performs independent testing and evaluation of firmwide processes and controls across the entire enterprise as the Firm’s “third line of defense” in managing risk. The Internal Audit Function is headed by the General Auditor, who reports to the Audit Committee.

In addition, there are other functions that contribute to the firmwide control environment including Finance, Human Resources, Legal, and Corporate Oversight & Control.

The Audit Committee of the Board assists the Board in its oversight of management’s responsibilities to assure that there is an effective system of controls reasonably designed to safeguard the assets and income of the Firm, assure the integrity of the Firm’s financial statements and maintain compliance with the Firm’s ethical standards, policies, plans and procedures, and with laws and regulations. In addition, the Audit Committee assists the Board in its oversight of the Firm’s independent registered public accounting firm’s qualifications, independence and performance, and of the performance of the Firm’s Internal Audit function.

The Compensation & Management Development Committee (“CMDC”) assists the Board in its oversight of the Firm’s compensation programs and reviews and approves the Firm’s overall compensation philosophy, incentive compensation pools, and compensation practices consistent with key business objectives and safety and soundness. The CMDC reviews Operating Committee members’ performance against their goals, and approves their compensation awards. The CMDC also periodically reviews the Firm’s diversity programs and management development and succession planning, and provides oversight of the Firm’s culture and conduct programs.

Among the Firm’s senior management-level committees that are primarily responsible for key risk-related functions are:

The Firmwide Risk Committee (“FRC”) is the Firm’s highest management-level risk committee. It provides oversight of the risks inherent in the Firm’s businesses. The FRC is co-chaired by the Firm’s CEO and CRO. The FRC serves as an escalation point for risk topics and issues raised by its members, the Line of Business Risk Committees, Firmwide Control Committee, Firmwide Fiduciary Risk Governance Committee, Firmwide Estimations Risk Committee, Culture and Conduct Risk Committee and regional Risk Committees, as appropriate. The FRC escalates significant issues to the DRPC, as appropriate.

The Firmwide Control Committee (“FCC”) provides a forum for senior management to review and discuss firmwide operational risks, including existing and emerging issues and operational risk metrics, and to review operational risk management execution in the context of the Operational Risk Management Framework (“ORMF”). The ORMF provides the framework for the governance, risk identification and assessment, measurement, monitoring and reporting of operational risk. The FCC is co-chaired by the Chief Control Officer and the Firmwide Risk Executive for Operational Risk Governance. The FCC relies on the prompt escalation of operational risk and control issues from businesses and functions as the primary owners of the operational risk. Operational risk and control issues may be escalated by business or function control committees to the FCC, which in turn, may escalate to the FRC, as appropriate.

The Firmwide Fiduciary Risk Governance Committee (“FFRGC”) is a forum for risk matters related to the Firm’s fiduciary activities. The FFRGC oversees the firmwide fiduciary risk governance framework, which supports the consistent identification and escalation of fiduciary risk issues by the relevant lines of business; approves risk or compliance policy exceptions requiring FFRGC approval; approves the scope and/or expansion of the Firm’s fiduciary framework; and reviews metrics to track fiduciary activity and issue resolution Firmwide. The FFRGC is co-chaired by the Asset Management CEO and the Asset & Wealth Management CRO. The FFRGC escalates significant fiduciary issues to the FRC, the DRPC and the Audit Committee, as appropriate.

The Firmwide Estimations Risk Committee (“FERC”) reviews and oversees governance and execution activities related to models and certain analytical and judgment based estimations, such as those used in risk management, budget forecasting and capital planning and analysis. The FERC is chaired by the Firmwide Risk Executive for Model Risk Governance and Review. The FERC serves as an escalation channel for relevant topics and issues raised by its members and the Line of Business Estimation Risk Committees. The FERC escalates significant issues to the FRC, as appropriate.

The Culture and Conduct Risk Committee (“CCRC”) provides oversight of culture and conduct initiatives to develop a more holistic view of conduct risks and to connect key programs across the Firm to identify opportunities and emerging areas for focus. The CCRC is co-chaired by the Chief Culture & Conduct Officer and the Conduct Risk Compliance Executive. The CCRC escalates significant issues to the FRC, as appropriate.

Line of Business and Regional Risk Committees review the ways in which the particular line of business or the business operating in a particular region could be exposed to adverse outcomes with a focus on identifying, accepting, escalating and/or requiring remediation of matters brought to these committees. These committees may escalate to the FRC, as appropriate. LOB risk committees are co-chaired by the LOB CEO and the LOB CRO. Each LOB risk committee may create sub-committees with requirements for escalation. The regional committees are established similarly, as appropriate, for the region.

In addition, each line of business and function is required to have a Control Committee. These control committees oversee the control environment of their respective business or function. As part of that mandate, they are responsible for reviewing data which indicates the quality and stability of the processes in a business or function, reviewing key operational risk issues and focusing on processes with shortcomings and overseeing process remediation. These committees escalate issues to the FCC, as appropriate.

The Firmwide Asset Liability Committee (“ALCO”), chaired by the Firm’s Treasurer and Chief Investment Officer under the direction of the CFO, monitors the Firm’s balance sheet, liquidity risk and structural interest rate risk. ALCO reviews the Firm’s overall structural interest rate risk position, and the Firm’s funding requirements and strategy. ALCO is responsible for reviewing and approving the Firm’s Funds Transfer Pricing Policy (through which lines of business “transfer” interest rate risk and liquidity risk to Treasury and CIO), the Firm’s Intercompany Funding and Liquidity Policy and the Firm’s Contingency Funding Plan.

The Firmwide Capital Governance Committee, chaired by the Head of the Regulatory Capital Management Office, is responsible for reviewing the Firm’s Capital Management Policy and the principles underlying capital issuance and distribution alternatives and decisions. The Committee oversees the capital adequacy assessment process, including the overall design, scenario development and macro assumptions, and ensures that capital stress test programs are designed to adequately capture the risks specific to the Firm’s businesses.

The Firmwide Valuation Governance Forum (“VGF”) is composed of senior finance and risk executives and is responsible for overseeing the management of risks arising from valuation activities conducted across the Firm. The VGF is chaired by the Firmwide head of the Valuation Control Group (“VCG”) under the direction of the Firm’s Controller, and includes sub-forums covering the Corporate & Investment Bank, Consumer & Community Banking, Commercial Banking, Asset & Wealth Management and certain corporate functions, including Treasury and CIO.

In addition, the JPMorgan Chase Bank, N.A. Board of Directors is responsible for the oversight of management of the Bank. The JPMorgan Chase Bank, N.A. Board accomplishes this function acting directly and through the principal standing committees of the Firm’s Board of Directors. Risk and control oversight on behalf of JPMorgan Chase Bank N.A. is primarily the responsibility of the DRPC and the Audit Committee of the Firm’s Board of Directors, respectively, and, with respect to compensation and other management-related matters, the Compensation & Management Development Committee of the Firm’s Board of Directors.

Risk Identification

The Firm has a Risk Identification process in which the first line of defense identifies material risks inherent to the Firm, catalogs them in a central repository and reviews the most material risks on a regular basis. The second line of defense, at a firmwide level, establishes the risk identification framework, coordinates the process, maintains the central repository and reviews and challenges the first line’s identification of risks.

Strategic risk is the risk associated with the Firm’s current and future business plans and objectives. Strategic risk includes the risk to current or anticipated earnings, capital, liquidity, enterprise value, or the Firm’s reputation arising from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the industry or external environment.

Overview

The Operating Committee and the senior leadership of each LOB are responsible for managing the Firm’s most significant strategic risks. Strategic risks are overseen by IRM through participation in business reviews, LOB senior management committees, ongoing management of the Firm’s risk appetite and limit framework, and other relevant governance forums. The Board of Directors oversees management’s strategic decisions, and the DRPC oversees IRM and the Firm’s risk management framework.

The Firm’s strategic planning process, which includes the development and execution of strategic priorities and initiatives by the Operating Committee and the management teams of the lines of business, is an important process for managing the Firm’s strategic risk. Guided by the Firm’s How We Do Business (“HWDB”) principles, the strategic priorities and initiatives are updated annually and include evaluating performance against prior year initiatives, assessment of the operating environment, refinement of existing strategies and development of new strategies.

These strategic priorities and initiatives are then incorporated in the Firm’s budget, and are reviewed by the Board of Directors.

In the process of developing the strategic initiatives, line of business leadership identify the strategic risks associated with their strategic initiatives and those risks are incorporated into the Firmwide Risk Identification process and monitored and assessed as part of the Firmwide Risk Appetite framework. For further information on Risk Identification, see Enterprise-Wide Risk Management on page 75. For further information on the Risk Appetite framework see, Enterprise-Wide Risk Management on

page 77.

The Firm’s balance sheet strategy, which focuses on risk-adjusted returns, strong capital and robust liquidity, is key to management of strategic risk. For further information on capital risk, see Capital Risk Management on pages 82–91. For further information on liquidity risk see, Liquidity Risk Management on pages 92–97

For further information on reputation risk, see Reputation Risk Management on page 98.

Governance and oversight

The Firm’s Operating Committee defines the most significant strategic priorities and initiatives, including those of the Firm, the LOBs and the Corporate functions, for the coming year and evaluates performance against the prior year. As part of the strategic planning process, IRM conducts a qualitative assessment of those significant initiatives to determine the impact on the risk profile of the Firm. The Firm’s priorities, initiatives and IRM’s assessment are provided to the Board for its review.

As part of its ongoing oversight and management of risk across the Firm, IRM is regularly engaged in significant discussions and decision-making across the Firm, including decisions to pursue new business opportunities or modify or exit existing businesses.

Capital risk is the risk the Firm has an insufficient level and composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions.

A strong capital position is essential to the Firm’s business strategy and competitive position. Maintaining a strong balance sheet to manage through economic volatility is considered a strategic imperative of the Firm’s Board of Directors, CEO and Operating Committee. The Firm’s fortress balance sheet philosophy focuses on risk-adjusted returns, strong capital and robust liquidity. The Firm’s capital risk management strategy focuses on maintaining long-term stability to enable it to build and invest in market-leading businesses, even in a highly stressed environment. Senior management considers the implications on the Firm’s capital prior to making decisions that could impact future business activities. In addition to considering the Firm’s earnings outlook, senior management evaluates all sources and uses of capital with a view to preserving the Firm’s capital strength.

The Firm’s capital risk management objectives are to hold capital sufficient to:


•	Maintain “well-capitalized” status for the Firm and its insured depository institution (“IDI”) subsidiaries;


•	Support risks underlying business activities;


•	Maintain sufficient capital in order to continue to build and invest in its businesses through the cycle and in stressed environments;


•	Retain flexibility to take advantage of future investment opportunities;


•	Serve as a source of strength to its subsidiaries;


•	Meet capital distribution objectives; and


•	Maintain sufficient capital resources to operate throughout a resolution period in accordance with the Firm’s preferred resolution strategy.

These objectives are achieved through the establishment of minimum capital targets and a strong capital governance framework. Capital risk management is intended to be flexible in order to react to a range of potential events. The Firm’s minimum capital targets are based on the most binding of three pillars: an internal assessment of the Firm’s capital needs; an estimate of required capital under the CCAR and Dodd-Frank Act stress testing requirements; and Basel III Fully Phased-In regulatory minimums. Where necessary, each pillar may include a management-established buffer. The capital governance framework requires regular monitoring of the Firm’s capital positions, stress testing and defining escalation protocols, both at the Firm and material legal entity levels.

Strategy and governance

The Firm’s CEO, together with the Board of Directors and the Operating Committee, establishes principles and guidelines for capital planning, issuance, usage and distributions, and minimum capital targets for the level and composition of capital in business-as-usual and highly stressed environments. The DRPC reviews and approves the capital management and governance policy of the Firm. The Firm’s Audit Committee is responsible for reviewing and approving the capital stress testing control framework.

The Capital Governance Committee and the Regulatory Capital Management Office (“RCMO”) support the Firm’s strategic capital decision-making. The Capital Governance Committee oversees the capital adequacy assessment process, including the overall design, scenario development and macro assumptions, and ensures that capital stress test programs are designed to adequately capture the risks specific to the Firm’s businesses. RCMO, which reports to the Firm’s CFO, is responsible for designing and monitoring the Firm’s execution of its capital policies and strategies once approved by the Board, as well as reviewing and monitoring the execution of its capital adequacy assessment process. The Basel Independent Review function (“BIR”), which reports to the RCMO, conducts independent assessments of the Firm’s regulatory capital framework to ensure compliance with the applicable U.S. Basel rules in support of senior management’s responsibility for assessing and managing capital and for the DRPC’s oversight of management in executing that responsibility. For additional discussion on the DRPC, see Enterprise-wide Risk Management on pages 75–137.

Monitoring and management of capital

In its monitoring and management of capital, the Firm takes into consideration an assessment of economic risk and all regulatory capital requirements to determine the level of capital needed to meet and maintain the objectives discussed above, as well as to support the framework for allocating capital to its business segments. While economic risk is considered prior to making decisions on future business activities, in most cases the Firm considers risk-based regulatory capital to be a proxy for economic risk capital.

Regulatory capital

The Federal Reserve establishes capital requirements, including well-capitalized standards, for the consolidated financial holding company. The OCC establishes similar minimum capital requirements for the Firm’s national banks, including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. The U.S. capital requirements generally follow the Capital Accord of the Basel Committee, as amended from time to time.

Basel III overview

Capital rules under Basel III establish minimum capital ratios and overall capital adequacy standards for large and internationally active U.S. bank holding companies (“BHC”) and banks, including the Firm and its IDI subsidiaries. Basel III sets forth two comprehensive approaches for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). Certain of the requirements of Basel III are subject to phase-in periods that began on January 1, 2014 and continue through the end of 2018 (“transitional period”).

Basel III establishes capital requirements for calculating credit risk RWA and market risk RWA, and in the case of Basel III Advanced, operational risk RWA. Key differences in the calculation of credit risk RWA between the Standardized and Advanced approaches are that for Basel III Advanced, credit risk RWA is based on risk-sensitive approaches which largely rely on the use of internal credit models and parameters, whereas for Basel III Standardized, credit risk RWA is generally based on supervisory risk-weightings which vary primarily by counterparty type and asset class. Market risk RWA is calculated on a generally consistent basis between Basel III Standardized and Basel III Advanced. In addition to the RWA calculated under these methodologies, the Firm may supplement such amounts to incorporate management judgment and feedback from its regulators.

Basel III also includes a requirement for Advanced Approach banking organizations, including the Firm, to calculate the SLR. For additional information on the SLR, see page 88.

On December 7, 2017, the Basel Committee issued the Basel III Reforms. Potential changes to the requirements for U.S. financial institutions are being considered by the U.S. banking regulators. For additional information on Basel III reforms, refer to Supervision & Regulation on pages 1–8.

Basel III Fully Phased-In

The Basel III transitional period will end on December 31, 2018, at which point the Firm will calculate its capital ratios under both the Basel III Standardized and Advanced Approaches on a Fully Phased–In basis. In the case of the SLR, the Fully Phased-In well-capitalized ratio is effective January 1, 2018. The Firm manages each of its lines of business, as well as the corporate functions, primarily on a Basel III Fully Phased-In basis.

For additional information on the Firm, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A.’s capital, RWA and capital ratios under Basel III Standardized and Advanced Fully Phased-In rules and the SLR calculated under the Basel III Advanced Fully Phased-In rules, all of which are considered key regulatory capital measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54.

The Basel III rules include minimum capital ratio requirements that are subject to phase-in periods through the end of 2018. The capital adequacy of the Firm and its IDI subsidiaries, both during the transitional period and upon full phase-in, is evaluated against the Basel III approach (Standardized or Advanced) which, for each quarter, results in the lower ratio as required by the Collins Amendment of the Dodd-Frank Act (the “Collins Floor”). The Basel III Standardized Fully Phased-In CET1 ratio is the Firm’s current binding constraint, and the Firm expects that this will remain its binding constraint for the foreseeable future.

Additional information regarding the Firm’s capital ratios, as well as the U.S. federal regulatory capital standards to which the Firm is subject, is presented in Note 26. For further information on the Firm’s Basel III measures, see the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website (http://investor.shareholder.com/jpmorganchase/basel.cfm).

All banking institutions are currently required to have a minimum capital ratio of 4.5% of risk weighted assets. Certain banking organizations, including the Firm, are required to hold additional amounts of capital to serve as a “capital conservation buffer”. The capital conservation buffer is intended to be used to absorb potential losses in times of financial or economic stress. If not maintained, the Firm could be limited in the amount of capital that may be distributed, including dividends and common equity repurchases. The capital conservation buffer is subject to a

phase-in period that began January 1, 2016 and continues through the end of 2018.

As an expansion of the capital conservation buffer, the Firm is also required to hold additional levels of capital in the form of a GSIB surcharge and a countercyclical capital buffer.

Under the Federal Reserve’s final rule, the Firm is required to calculate its GSIB surcharge on an annual basis under two separately prescribed methods, and is subject to the higher of the two. The first (“Method 1”), reflects the GSIB surcharge as prescribed by the Basel Committee’s assessment methodology, and is calculated across five criteria: size, cross-jurisdictional activity, interconnectedness, complexity and substitutability. The second (“Method 2”), modifies the Method 1 requirements to include a measure of short-term wholesale funding in place of substitutability, and introduces a GSIB score “multiplication factor”. The following table represents the Firm’s GSIB surcharge.



	2017		2016
Fully Phased-In:
Method 1	2.50	%	2.50	%
Method 2	3.50	%	4.50	%

Transitional^(a)	1.75	%	1.125	%


(a)	The GSIB surcharge is subject to transition provisions (in 25% increments) through the end of 2018.

The Firm’s effective GSIB surcharge for 2018 is anticipated to be 3.5%.

The countercyclical capital buffer takes into account the macro financial environment in which large, internationally active banks function. On September 8, 2016 the Federal Reserve published the framework that will apply to the setting of the countercyclical capital buffer. As of December 1, 2017, the Federal Reserve reaffirmed setting the U.S. countercyclical capital buffer at 0%, and stated that it will review the amount at least annually. The countercyclical capital buffer can be increased if the Federal Reserve, FDIC and OCC determine that credit growth in the economy has become excessive and can be set at up to an additional 2.5% of RWA subject to a 12-month implementation period.

The Firm believes that it will operate with a Basel III CET1 capital ratio between 11% and 12% over the medium term. It is the Firm’s intention that its capital ratios will continue to meet regulatory minimums as they are fully phased in 2019 and thereafter.

In addition to meeting the capital ratio requirements of Basel III, the Firm also must maintain minimum capital and leverage ratios in order to be “well-capitalized.” The following table represents the ratios that the Firm and its IDI subsidiaries must maintain in order to meet the definition of “well-capitalized” under the regulations issued by the Federal Reserve and the Prompt Corrective Action (“PCA”) requirements of the FDIC Improvement Act (“FDICIA”), respectively.



	Well-capitalized ratios
	BHC		IDI
Capital ratios
CET1	—	%	6.5	%
Tier 1 capital	6.0		8.0
Total capital	10.0		10.0
Tier 1 leverage	—		5.0
SLR^(a)	5.0		6.0


(a)	In the case of the SLR, the Fully Phased-In well-capitalized ratio is effective January 1, 2018.

Capital

The following table presents reconciliations of total stockholders’ equity to Basel III Fully Phased-In CET1 capital, Tier 1 capital and Basel III Advanced and Standardized Fully Phased-In Total capital as of December 31, 2017 and 2016. For additional information on the components of regulatory capital, see Note 26.



Capital components
(in millions)	December 31, 2017			December 31, 2016
Total stockholders’ equity	$	255,693		$	254,190
Less: Preferred stock	26,068			26,068
Common stockholders’ equity	229,625			228,122
Less:
Goodwill	47,507			47,288
Other intangible assets	855			862
Add:
Certain Deferred tax liabilities^(a)(b)	2,204			3,230
Less: Other CET1 capital adjustments^(b)	223			1,468
Standardized/Advanced Fully Phased-In CET1 capital	183,244			181,734
Preferred stock	26,068			26,068
Less:
Other Tier 1 adjustments^(c)	748			328
Standardized/Advanced Fully Phased-In Tier 1 capital	$	208,564		$	207,474
Long-term debt and other instruments qualifying as Tier 2 capital	$	14,827		$	15,253
Qualifying allowance for credit losses	14,672			14,854
Other	(103		)	(94		)
Standardized Fully Phased-In Tier 2 capital	$	29,396		$	30,013
Standardized Fully Phased-in Total capital	$	237,960		$	237,487
Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital	(10,462		)	(10,961		)
Advanced Fully Phased-In Tier 2 capital	$	18,934		$	19,052
Advanced Fully Phased-In Total capital	$	227,498		$	226,526


(a)	Represents deferred tax liabilities related to tax-deductible goodwill and identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating TCE.


(b)	Includes the effect from the revaluation of the Firm’s net deferred tax liability as a result of the enactment of the TCJA.


(c)	Includes the deduction associated with the permissible holdings of covered funds (as defined by the Volcker Rule). The deduction was not material as of December 31, 2017 and 2016.

The following table presents reconciliations of the Firm’s Basel III Transitional CET1 capital to the Firm’s Basel III Fully Phased-In CET1 capital as of December 31, 2017 and 2016.



(in millions)	December 31, 2017			December 31, 2016
Transitional CET1 capital	$	183,300		$	182,967
AOCI phase-in^(a)	128			(156		)
CET1 capital deduction phase-in^(b)	(20		)	(695		)
Intangible assets deduction phase-in^(c)	(160		)	(312		)
Other adjustments to CET1 capital^(d)	(4		)	(70		)
Fully Phased-In CET1 capital	$	183,244		$	181,734


(a)	Includes the remaining balance of accumulated other comprehensive income (“AOCI”) related to AFS debt securities and defined benefit pension and other postretirement employee benefit (“OPEB”) plans that will qualify as Basel III CET1 capital upon full phase-in.


(b)	Predominantly includes regulatory adjustments related to changes in DVA, as well as CET1 deductions for defined benefit pension plan assets and deferred tax assets related to tax attributes, including NOLs.


(c)	Relates to intangible assets, other than goodwill and MSRs, that are required to be deducted from CET1 capital upon full phase-in.


(d)	Includes minority interest and the Firm’s investments in its own CET1 capital instruments.

Capital rollforward

The following table presents the changes in Basel III Fully Phased-In CET1 capital, Tier 1 capital and Tier 2 capital for the year ended December 31, 2017.



Year Ended December 31, (in millions)	2017
Standardized/Advanced CET1 capital at December 31, 2016	$	181,734
Net income applicable to common equity^(a)	22,778
Dividends declared on common stock	(7,542		)
Net purchase of treasury stock	(13,741		)
Changes in additional paid-in capital	(1,048		)
Changes related to AOCI	536
Adjustment related to DVA^(b)	468
Changes related to other CET1 capital adjustments^(c)	59
Increase in Standardized/Advanced CET1 capital	1,510
Standardized/Advanced CET1 capital at December 31, 2017	$	183,244

Standardized/Advanced Tier 1 capital at December 31, 2016	$	207,474
Change in CET1 capital	1,510
Net issuance of noncumulative perpetual preferred stock	—
Other	(420		)
Increase in Standardized/Advanced Tier 1 capital	1,090
Standardized/Advanced Tier 1 capital at December 31, 2017	$	208,564

Standardized Tier 2 capital at December 31, 2016	$	30,013
Change in long-term debt and other instruments qualifying as Tier 2	(426		)
Change in qualifying allowance for credit losses	(182		)
Other	(9		)
Decrease in Standardized Tier 2 capital	(617		)
Standardized Tier 2 capital at December 31, 2017	$	29,396
Standardized Total capital at December 31, 2017	$	237,960
Advanced Tier 2 capital at December 31, 2016	$	19,052
Change in long-term debt and other instruments qualifying as Tier 2	(426		)
Change in qualifying allowance for credit losses	317
Other	(9		)
Decrease in Advanced Tier 2 capital	(118		)
Advanced Tier 2 capital at December 31, 2017	$	18,934
Advanced Total capital at December 31, 2017	$	227,498


(a)	Includes 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)	Includes DVA related to structured notes recorded in AOCI.


(c)	Includes the effect from the revaluation of the Firm’s net deferred tax liability as a result of the enactment of the TCJA.

Supplementary leverage ratio

The SLR is defined as Tier 1 capital under Basel III divided by the Firm’s total leverage exposure. Total leverage exposure is calculated by taking the Firm’s total average on-balance sheet assets, less amounts permitted to be deducted for Tier 1 capital, and adding certain off-balance sheet exposures, such as undrawn commitments and derivatives potential future exposure.

The following table presents the components of the Firm’s Fully Phased-In SLR as of December 31, 2017 and 2016.



(in millions, except ratio)	December 31, 2017			December 31, 2016
Tier 1 capital	$	208,564		$	207,474
Total average assets	2,562,155			2,532,457
Less: Adjustments for deductions from Tier 1 capital	47,333			46,977
Total adjusted average assets^(a)	2,514,822			2,485,480
Off-balance sheet exposures^(b)	690,193			707,359
Total leverage exposure	$	3,205,015		$	3,192,839
SLR	6.5		%	6.5		%


(a)	Adjusted average assets, for purposes of calculating the SLR, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets.


(b)	Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter.

As of December 31, 2017, JPMorgan Chase Bank, N.A.’s and Chase Bank USA, N.A.’s Fully Phased-In SLRs are approximately 6.7% and 11.8%, respectively.

Line of business equity

Each business segment is allocated capital by taking into consideration stand-alone peer comparisons and regulatory capital requirements. For 2016, capital was allocated to each business segment for, among other things, goodwill and other intangibles associated with acquisitions effected by the line of business. ROE is measured and internal targets for expected returns are established as key measures of a business segment’s performance.

On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as the assumptions and methodologies used to allocate capital. Through the end of 2016, capital was allocated to the lines of business based on a single measure, Basel III Advanced Fully Phased-In RWA. Effective January 1, 2017, the Firm’s methodology used to allocate capital to the Firm’s business segments was updated. The new methodology incorporates Basel III Standardized Fully Phased-In RWA (as well as Basel III Advanced Fully Phased-In RWA), leverage, the GSIB surcharge, and a simulation of capital in a severe stress environment. The methodology will continue to be weighted towards Basel III Advanced Fully Phased-In RWA because the Firm believes it to be the best proxy for economic risk. The Firm will consider further changes to its capital allocation methodology as the regulatory framework evolves. In addition, under the new methodology, capital is no longer allocated to each line of business for goodwill and other intangibles associated with acquisitions effected by the line of business. The Firm will continue to establish internal ROE targets for its business segments, against which they will be measured, as a key performance indicator.

The table below reflects the Firm’s assessed level of capital allocated to each line of business as of the dates indicated.



Line of business equity (Allocated capital)
			December 31,
(in billions)	January 1, 2018		2017		2016
Consumer & Community Banking	$	51.0	$	51.0	$	51.0
Corporate & Investment Bank	70.0		70.0		64.0
Commercial Banking	20.0		20.0		16.0
Asset & Wealth Management	9.0		9.0		9.0
Corporate	79.6		79.6		88.1
Total common stockholders’ equity	$	229.6	$	229.6	$	228.1

Planning and stress testing

Comprehensive Capital Analysis and Review

The Federal Reserve requires large bank holding companies, including the Firm, to submit a capital plan on an annual basis. The Federal Reserve uses the CCAR and Dodd-Frank Act stress test processes to ensure that large BHCs have sufficient capital during periods of economic and financial stress, and have robust, forward-looking capital assessment and planning processes in place that address each BHC’s unique risks to enable it to absorb losses under certain stress scenarios. Through the CCAR, the Federal Reserve evaluates each BHC’s capital adequacy and internal capital adequacy assessment processes (“ICAAP”), as well as its plans to make capital distributions, such as dividend payments or stock repurchases.

On June 28, 2017, the Federal Reserve informed the Firm that it did not object, on either a quantitative or qualitative basis, to the Firm’s 2017 capital plan. For information on actions taken by the Firm’s Board of Directors following the 2017 CCAR results, see Capital actions on pages 89-90.

The Firm’s CCAR process is integrated into and employs the same methodologies utilized in the Firm’s ICAAP process, as discussed below.

Internal Capital Adequacy Assessment Process

Semiannually, the Firm completes the ICAAP, which provides management with a view of the impact of severe and unexpected events on earnings, balance sheet positions, reserves and capital. The Firm’s ICAAP integrates stress testing protocols with capital planning.

The process assesses the potential impact of alternative economic and business scenarios on the Firm’s earnings and capital. Economic scenarios, and the parameters underlying those scenarios, are defined centrally and applied uniformly across the businesses. These scenarios are articulated in terms of macroeconomic factors, which are key drivers of business results; global market shocks, which generate short-term but severe trading losses; and idiosyncratic operational risk events. The scenarios are intended to capture and stress key vulnerabilities and idiosyncratic risks facing the Firm. However, when defining a broad range of scenarios, actual events can always be worse. Accordingly, management considers additional stresses outside these scenarios, as necessary. ICAAP results are reviewed by management and the Audit Committee.

Capital actions

Preferred stock

Preferred stock dividends declared were $1.7 billion for the year ended December 31, 2017.

On October 20, 2017, the Firm issued $1.3 billion of fixed-to-floating rate non-cumulative preferred stock, Series CC, with an initial dividend rate of 4.625%. On December 1, 2017, the Firm redeemed all $1.3 billion of its outstanding 5.50% non-cumulative preferred stock, Series O.

For additional information on the Firm’s preferred stock, see Note 20.

Trust preferred securities

On December 18, 2017, the Delaware trusts that issued seven series of outstanding trust preferred securities were liquidated, $1.6 billion of trust preferred and $56 million of common securities originally issued by those trusts were cancelled, and the junior subordinated debentures previously held by each trust issuer were distributed pro rata to the holders of the corresponding series of trust preferred and common securities.

The Firm redeemed $1.6 billion of trust preferred securities in the year ended December 31, 2016.

Common stock dividends

The Firm’s common stock dividend policy reflects JPMorgan Chase’s earnings outlook, desired dividend payout ratio, capital objectives, and alternative investment opportunities.

On September 19, 2017, the Firm announced that its Board of Directors increased the quarterly common stock dividend to $0.56 per share, effective with the dividend paid on October 31, 2017. The Firm’s dividends are subject to the Board of Directors’ approval on a quarterly basis.

For information regarding dividend restrictions, see Note 20 and Note 25.

The following table shows the common dividend payout ratio based on net income applicable to common equity.



Year ended December 31,	2017		2016		2015
Common dividend payout ratio	33	%	30	%	28	%

Common equity

During the year ended December 31, 2017, warrant holders exercised their right to purchase 9.9 million shares of the Firm’s common stock. The Firm issued from treasury stock 5.4 million shares of its common stock as a result of these exercises. As of December 31, 2017, 15.0 million warrants remained outstanding, compared with 24.9 million outstanding as of December 31, 2016.

Effective June 28, 2017, the Firm’s Board of Directors authorized the repurchase of up to $19.4 billion of common equity (common stock and warrants) between July 1, 2017 and June 30, 2018, as part of its annual capital plan.

As of December 31, 2017, $9.8 billion of authorized repurchase capacity remained under the common equity repurchase program.

The following table sets forth the Firm’s repurchases of common equity for the years ended December 31, 2017, 2016 and 2015. There were no repurchases of warrants during the years ended December 31, 2017, 2016 and 2015.



Year ended December 31, (in millions)	2017		2016		2015
Total number of shares of common stock repurchased	166.6		140.4		89.8
Aggregate purchase price of common stock repurchases	$	15,410	$	9,082	$	5,616

The Firm may, from time to time, enter into written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate repurchases in accordance with the common equity repurchase program. A Rule 10b5-1 repurchase plan allows the Firm to repurchase its equity during periods when it would not otherwise be repurchasing common equity — for example, during internal trading blackout periods. All purchases under Rule 10b5-1 plans must be made according to predefined schedules established when the Firm is not aware of material nonpublic information.

The authorization to repurchase common equity will be utilized at management’s discretion, and the timing of purchases and the exact amount of common equity that may be repurchased is subject to various factors, including market conditions; legal and regulatory considerations affecting the amount and timing of repurchase activity; the Firm’s capital position (taking into account goodwill and intangibles); internal capital generation; and alternative investment opportunities. The repurchase program does not include specific price targets or timetables; may be executed through open market purchases or privately negotiated transactions, or utilizing Rule 10b5-1 plans; and may be suspended by management at any time.

For additional information regarding repurchases of the Firm’s equity securities, see Part II, Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on page 28.

Other capital requirements

TLAC

On December 15, 2016, the Federal Reserve issued its final TLAC rule which requires the top-tier holding companies of eight U.S. GSIB holding companies, including the Firm, to maintain minimum levels of external TLAC and external long-term debt that satisfies certain eligibility criteria (“eligible LTD”), effective January 1, 2019.

The minimum external TLAC and the minimum level of eligible long-term debt requirements are shown below:

(a) RWA is the greater of Standardized and Advanced.

The final TLAC rule permanently grandfathered all long-term debt issued before December 31, 2016, to the extent these securities would be ineligible because they contained impermissible acceleration rights or were governed by non-U.S. law. As of December 31, 2017, the Firm was compliant with the requirements under the current rule to which it will be subject on January 1, 2019.

Liquidity risk is the risk that the Firm will be unable to meet its contractual and contingent financial obligations as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities.

Liquidity risk oversight

The Firm has a liquidity risk oversight function whose primary objective is to provide assessment, measurement, monitoring, and control of liquidity risk across the Firm. Liquidity risk oversight is managed through a dedicated firmwide Liquidity Risk Oversight group. The CIO, Treasury and Corporate (“CTC”) CRO, who reports to the Firm’s CRO, as part of the IRM function, is responsible for firmwide Liquidity Risk Oversight. Liquidity Risk Oversight’s responsibilities include:


•	Establishing and monitoring limits, indicators, and thresholds, including liquidity risk appetite tolerances;


•	Monitoring internal firmwide and material legal entity liquidity stress tests, and monitoring and reporting regulatory defined liquidity stress testing;


•	Approving or escalating for review liquidity stress assumptions;


•	Monitoring liquidity positions, balance sheet variances and funding activities, and


•	Conducting ad hoc analysis to identify potential emerging liquidity risks.

Liquidity management

Treasury and CIO is responsible for liquidity management. The primary objectives of effective liquidity management are to:


•	Ensure that the Firm’s core businesses and material legal entities are able to operate in support of client needs and meet contractual and contingent financial obligations through normal economic cycles as well as during stress events, and


•	Manage an optimal funding mix and availability of liquidity sources.

The Firm manages liquidity and funding using a centralized, global approach across its entities, taking into consideration both their current liquidity profile and any potential changes over time, in order to optimize liquidity sources and uses.

In the context of the Firm’s liquidity management, Treasury and CIO is responsible for:


•	Analyzing and understanding the liquidity characteristics of the assets and liabilities of the Firm, lines of business and legal entities, taking into account legal, regulatory, and operational restrictions;


•	Developing internal liquidity stress testing assumptions;


•	Defining and monitoring firmwide and legal entity-specific liquidity strategies, policies, guidelines, reporting and contingency funding plans;


•	Managing liquidity within the Firm’s approved liquidity risk appetite tolerances and limits;


•	Managing compliance with regulatory requirements related to funding and liquidity risk, and


•	Setting transfer pricing in accordance with underlying liquidity characteristics of balance sheet assets and liabilities as well as certain off-balance sheet items.

Risk governance and measurement

Specific committees responsible for liquidity governance include the firmwide ALCO as well as line of business and regional ALCOs, and the CTC Risk Committee. In addition, the DRPC reviews and recommends to the Board of Directors, for formal approval, the Firm’s liquidity risk tolerances, liquidity strategy, and liquidity policy at least annually. For further discussion of ALCO and other risk-related committees, see Enterprise-wide Risk Management on pages 75–137.

Internal stress testing

Liquidity stress tests are intended to ensure that the Firm has sufficient liquidity under a variety of adverse scenarios, including scenarios analyzed as part of the Firm’s resolution and recovery planning. Stress scenarios are produced for JPMorgan Chase & Co. (“Parent Company”) and the Firm’s material legal entities on a regular basis, and ad hoc stress tests are performed, as needed, in response to specific market events or concerns. Liquidity stress tests assume all of the Firm’s contractual financial obligations are met and take into consideration:


•	Varying levels of access to unsecured and secured funding markets,


•	Estimated non-contractual and contingent cash outflows, and


•	Potential impediments to the availability and transferability of liquidity between jurisdictions and material legal entities such as regulatory, legal or other restrictions.

Liquidity outflow assumptions are modeled across a range of time horizons and currency dimensions and contemplate both market and idiosyncratic stresses.

Results of stress tests are considered in the formulation of the Firm’s funding plan and assessment of its liquidity position. The Parent Company acts as a source of funding for the Firm through equity and long-term debt issuances, and the IHC provides funding support to the ongoing operations of the Parent Company and its subsidiaries, as necessary. The Firm maintains liquidity at the Parent Company and the IHC, in addition to liquidity held at the operating subsidiaries, at levels sufficient to comply with liquidity risk tolerances and minimum liquidity requirements, and to manage through periods of stress where access to normal funding sources is disrupted.

Contingency funding plan

The Firm’s contingency funding plan (“CFP”), which is approved by the firmwide ALCO and the DRPC, is a compilation of procedures and action plans for managing liquidity through stress events. The CFP incorporates the limits and indicators set by the Liquidity Risk Oversight group. These limits and indicators are reviewed regularly to identify the emergence of risks or vulnerabilities in the Firm’s liquidity position. The CFP identifies the alternative contingent funding and liquidity resources available to the Firm and its legal entities in a period of stress.

LCR and HQLA

The LCR rule requires the Firm to maintain an amount of unencumbered HQLA that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. HQLA is the amount of liquid assets that qualify for inclusion in the LCR. HQLA primarily consist of unencumbered cash and certain high quality liquid securities as defined in the LCR rule.

Under the LCR rule, the amount of HQLA held by JPMorgan Chase Bank N.A. and Chase Bank USA, N.A that are in excess of each entity’s standalone 100% minimum LCR requirement, and that are not transferable to non-bank affiliates, must be excluded from the Firm’s reported HQLA. Effective January 1, 2017, the LCR is required to be a minimum of 100%.

On December 19, 2016, the Federal Reserve published final LCR public disclosure requirements for certain BHCs and non-bank financial companies. Beginning with the second quarter of 2017, the Firm disclosed its average LCR for the quarter and the key quantitative components of the average LCR, along with a qualitative discussion of material drivers of the ratio, changes over time, and causes of such changes. The Firm will continue to make available its U.S. LCR Disclosure report on a quarterly basis on the Firm’s website at: (https://investor.shareholder.com/jpmorganchase/basel.cfm)

The following table summarizes the Firm’s average LCR for the three months ended December 31, 2017 based on the Firm’s current interpretation of the finalized LCR framework.



Average amount (in millions)	Three months ended December 31, 2017
HQLA
Eligible cash^(a)	$	370,126
Eligible securities^(b)(c)	189,955
Total HQLA^(d)	$	560,081
Net cash outflows	$	472,078
LCR	119		%
Net excess HQLA^(d)	$	88,003


(a)	Represents cash on deposit at central banks, primarily Federal Reserve Banks.


(b)	Predominantly U.S. Agency MBS, U.S. Treasuries, and sovereign bonds net of applicable haircuts under the LCR rules


(c)	HQLA eligible securities may be reported in securities borrowed or purchased under resale agreements, trading assets, or securities on the Firm’s Consolidated balance sheets.


(d)	Excludes average excess HQLA at JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. that are not transferable to non-bank affiliates.

For the three months ended December 31, 2017, the Firm’s average LCR was 119%, compared with an average of 120% for the three months ended September 30, 2017. The decrease in the ratio was largely attributable to a decrease in average HQLA, driven primarily by long-term debt maturities. The Firm’s average LCR may fluctuate from period to period, due to changes in its HQLA and estimated net cash outflows under the LCR as a result of ongoing business activity. The Firm’s HQLA are expected to be available to meet its liquidity needs in a time of stress.

Other liquidity sources

As of December 31, 2017, in addition to assets reported in the Firm’s HQLA under the LCR rule, the Firm had approximately $208 billion of unencumbered marketable securities, such as equity securities and fixed income debt securities, available to raise liquidity, if required. This includes HQLA-eligible securities included as part of the excess liquidity at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates.

As of December 31, 2017, the Firm also had approximately $277 billion of available borrowing capacity at various Federal Home Loan Banks (“FHLBs”), discount windows at Federal Reserve Banks and various other central banks as a result of collateral pledged by the Firm to such banks. This borrowing capacity excludes the benefit of securities reported in the Firm’s HQLA or other unencumbered securities that are currently pledged at Federal Reserve Bank discount windows. Although available, the Firm does not view the borrowing capacity at Federal Reserve Bank discount windows and the various other central banks as a primary source of liquidity.

NSFR

The net stable funding ratio (“NSFR”) is intended to measure the adequacy of “available” and “required” amounts of stable funding over a one-year horizon. On April 26, 2016, the U.S. NSFR proposal was released for large banks and BHCs and was largely consistent with the Basel Committee’s final standard.

While the final U.S. NSFR rule has yet to be released, as of December 31, 2017 the Firm estimates that it was compliant with the proposed 100% minimum NSFR based on its current understanding of the proposed rule.

Management believes that the Firm’s unsecured and secured funding capacity is sufficient to meet its on- and off-balance sheet obligations.

The Firm funds its global balance sheet through diverse sources of funding including a stable deposit franchise as well as secured and unsecured funding in the capital markets. The Firm’s loan portfolio is funded with a portion of the Firm’s deposits, through securitizations and, with respect to a portion of the Firm’s real estate-related loans, with secured borrowings from the FHLBs. Deposits in excess of the amount utilized to fund loans are primarily invested in the Firm’s investment securities portfolio or deployed in cash or other short-term liquid investments based on their interest rate and liquidity risk characteristics. Securities

borrowed or purchased under resale agreements and trading assets-debt and equity instruments are primarily funded by the Firm’s securities loaned or sold under agreements to repurchase, trading liabilities–debt and equity instruments, and a portion of the Firm’s long-term debt and stockholders’ equity. In addition to funding securities borrowed or purchased under resale agreements and trading assets-debt and equity instruments, proceeds from the Firm’s debt and equity issuances are used to fund certain loans and other financial and non-financial assets, or may be invested in the Firm’s investment securities portfolio. See the discussion below for additional information relating to Deposits, Short-term funding, and Long-term funding and issuance.

A key strength of the Firm is its diversified deposit franchise, through each of its lines of business, which provides a stable source of funding and limits reliance on the wholesale funding markets. A significant portion of the Firm’s deposits are consumer and wholesale operating deposits, which are both considered to be stable sources of liquidity. Wholesale operating deposits are considered to be stable sources of liquidity because they are generated from customers that maintain operating service relationships with the Firm.

The table below shows the loan and deposit balances, the loans-to-deposits ratios, and deposits as a percentage of total liabilities, as of December 31, 2017 and 2016.



As of December 31, (in billions except ratios)
	2017			2016
Deposits	$	1,444.0		$	1,375.2
Deposits as a % of total liabilities	63		%	61		%
Loans	930.7			894.8
Loans-to-deposits ratio	64		%	65		%

Deposits increased due to both higher consumer and wholesale deposits. The higher consumer deposits reflect the continuation of strong growth from new and existing customers, and low attrition rates. The higher wholesale deposits largely were driven by growth in client cash management activity in CIB’s Securities Services business, partially offset by lower balances in AWM reflecting balance migration predominantly into the Firm’s investment-related products.

The Firm believes average deposit balances are generally more representative of deposit trends than period-end deposit balances. The increase in average deposits for the year ended December 31, 2017 compared with the year ended December 31, 2016, was driven by an increase in both consumer and wholesale deposits. For further discussions of deposit and liability balance trends, see the discussion of the Firm’s business segments results and the Consolidated Balance Sheet Analysis on pages 55–74 and pages 47-48, respectively.



Sources of funds (excluding deposits)
As of or for the year ended December 31,					Average
(in millions)	2017		2016		2017		2016
Commercial paper	$	24,186	$	11,738	$	19,920	$	15,001
Other borrowed funds	27,616		22,705		26,612		21,139
Total short-term borrowings	$	51,802	$	34,443	$	46,532	$	36,140

Obligations of Firm-administered multi-seller conduits^(a)	$	3,045	$	2,719	$	3,206	$	5,153

Securities loaned or sold under agreements to repurchase:
Securities sold under agreements to repurchase^(b)	$	146,432	$	149,826	$	171,973	$	160,458
Securities loaned^(c)	7,910		12,137		11,526		13,195
Total securities loaned or sold under agreements to repurchase^(d)	$	154,342	$	161,963	$	183,499	$	173,653

Senior notes	$	155,852	$	151,042	$	154,352	$	153,768
Trust preferred securities^(e)	690		2,345		2,276		3,724
Subordinated debt^(e)	16,553		21,940		18,832		24,224
Structured notes	45,727		37,292		42,918		35,978
Total long-term unsecured funding	$	218,822	$	212,619	$	218,378	$	217,694

Credit card securitization^(a)	$	21,278	$	31,181	$	25,933	$	29,428
Other securitizations^(a)(f)	—		1,527		626		1,669
FHLB advances	60,617		79,519		69,916		73,260
Other long-term secured funding^(g)	4,641		3,107		3,195		4,619
Total long-term secured funding	$	86,536	$	115,334	$	99,670	$	108,976

Preferred stock^(h)	$	26,068	$	26,068	26,212		$	26,068
Common stockholders’ equity^(h)	$	229,625	$	228,122	230,350		$	224,631

The Firm’s sources of short-term secured funding primarily consist of securities loaned or sold under agreements to repurchase. These instruments are secured predominantly by high-quality securities collateral, including government-issued debt and agency MBS, and constitute a significant portion of the federal funds purchased and securities loaned or sold under repurchase agreements on the Consolidated balance sheets. The increase in the average balance of securities loaned or sold under agreements to repurchase for the year ended December 31, 2017, compared to December 31, 2016, was largely due to client activities in CIB. The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to customers’ investment and financing activities; the Firm’s demand for financing; the ongoing management of the mix of the Firm’s liabilities, including its secured and unsecured financing (for both the investment

securities and market-making portfolios); and other market and portfolio factors.

The Firm’s sources of short-term unsecured funding primarily consist of issuances of wholesale commercial paper. The increase in short-term unsecured funding was primarily due to higher issuance of commercial paper reflecting in part a change in the mix of funding from securities sold under repurchase agreements for CIB Markets activities.

Long-term funding and issuance

Long-term funding provides additional sources of stable funding and liquidity for the Firm. The Firm’s long-term funding plan is driven primarily by expected client activity, liquidity considerations, and regulatory requirements, including TLAC. Long-term funding objectives include maintaining diversification, maximizing market access and

optimizing funding costs. The Firm evaluates various funding markets, tenors and currencies in creating its optimal long-term funding plan.

The significant majority of the Firm’s long-term unsecured funding is issued by the Parent Company to provide maximum flexibility in support of both bank and non-bank subsidiary funding needs. The Parent Company advances substantially all net funding proceeds to its subsidiary, the IHC. The IHC does not issue debt to external counterparties. The following table summarizes long-term unsecured issuance and maturities or redemptions for the years ended December 31, 2017 and 2016. For additional information, see Note 19.



Long-term unsecured funding
Year ended December 31, (in millions)	2017		2016
Issuance
Senior notes issued in the U.S. market	$	21,192	$	25,639
Senior notes issued in non-U.S. markets	2,210		7,063
Total senior notes	23,402		32,702
Subordinated debt	—		1,093
Structured notes	29,040		22,865
Total long-term unsecured funding – issuance	$	52,442	$	56,660

Maturities/redemptions
Senior notes	$	22,337	$	29,989
Trust preferred securities	—		1,630
Subordinated debt	6,901		3,596
Structured notes	22,581		15,925
Total long-term unsecured funding – maturities/redemptions	$	51,819	$	51,140

The Firm raises secured long-term funding through securitization of consumer credit card loans and advances from the FHLBs.

The following table summarizes the securitization issuance and FHLB advances and their respective maturities or redemption for the years ended December 31, 2017 and 2016.



Long-term secured funding
Year ended December 31,	Issuance				Maturities/Redemptions
(in millions)	2017		2016		2017		2016
Credit card securitization	$	1,545	$	8,277	$	11,470	$	5,025
Other securitizations^(a)			—		55		233
FHLB advances	—		17,150		18,900		9,209
Other long-term secured funding^(b)	2,354		455		731		2,645
Total long-term secured funding	$	3,899	$	25,882	$	31,156	$	17,112


(a)	Other securitizations includes securitizations of student loans. The Firm deconsolidated the student loan securitization entities in the second quarter of 2017 as it no longer had a controlling financial interest in these entities as a result of the sale of the student loan portfolio.


(b)	Includes long-term structured notes which are secured.

The Firm’s wholesale businesses also securitize loans for client-driven transactions; those client-driven loan securitizations are not considered to be a source of funding for the Firm and are not included in the table above. For further description of the client-driven loan securitizations, see Note 14.

On February 22, 2017, Moody’s published its updated rating methodologies for securities firms. As a result of this methodology change, J.P. Morgan Securities LLC’s long-term issuer rating was downgraded by one notch from Aa3 to A1; the short-term issuer rating was unchanged and the outlook remained stable.

On June 1, 2017, JPMorgan Chase Bank, N.A. terminated its guarantee of the payment of all obligations of J.P. Morgan Securities plc arising after such termination. J.P. Morgan Securities plc, whose credit ratings previously reflected the benefit of this guarantee, is now rated on a stand-alone, non-guaranteed basis.

Downgrades of the Firm’s long-term ratings by one or two notches could result in an increase in its cost of funds, and access to certain funding markets could be reduced as noted above. The nature and magnitude of the impact of ratings downgrades depends on numerous contractual and behavioral factors which the Firm believes are incorporated in its liquidity risk and stress testing metrics. The Firm believes that it maintains sufficient liquidity to withstand a

potential decrease in funding capacity due to ratings downgrades.

JPMorgan Chase’s unsecured debt does not contain requirements that would call for an acceleration of payments, maturities or changes in the structure of the existing debt, provide any limitations on future borrowings or require additional collateral, based on unfavorable changes in the Firm’s credit ratings, financial ratios, earnings, or stock price.

Critical factors in maintaining high credit ratings include a stable and diverse earnings stream, strong capital ratios, strong credit quality and risk management controls, diverse funding sources, and disciplined liquidity monitoring procedures. Rating agencies continue to evaluate economic and geopolitical trends, regulatory developments, future profitability, risk management practices, and litigation matters, as well as their broader ratings methodologies. Changes in any of these factors could lead to changes in the Firm’s credit ratings.

Reputation risk is the potential that an action, inaction, transaction, investment or event will reduce trust in the Firm’s integrity or competence by its various constituents, including clients, counterparties, investors, regulators, employees and the broader public. Maintaining the Firm’s reputation is the responsibility of each individual employee of the Firm. The Firm’s Reputation Risk Governance policy explicitly vests each employee with the responsibility to consider the reputation of the Firm when engaging in any activity. Because the types of events that could harm the Firm’s reputation are so varied across the Firm’s lines of business, each line of business has a separate reputation risk governance infrastructure in place, which consists of

three key elements: clear, documented escalation criteria appropriate to the business; a designated primary discussion forum — in most cases, one or more dedicated reputation risk committees; and a list of designated contacts to whom questions relating to reputation risk should be referred. Any matter giving rise to reputation risk that originates in a corporate function is required to be escalated directly to Firmwide Reputation Risk Governance (“FRRG”) or to the relevant Risk Committee. Reputation risk governance is overseen by FRRG, which provides oversight of the governance infrastructure and process to support the consistent identification, escalation, management and monitoring of reputation risk issues firmwide.

Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments.

Credit risk management

Credit risk is the risk associated with the default or change in credit profile of a client, counterparty or customer. The Firm provides credit to a variety of customers, ranging from large corporate and institutional clients to individual consumers and small businesses. In its consumer businesses, the Firm is exposed to credit risk primarily through its home lending, credit card, auto, and business banking businesses. In its wholesale businesses, the Firm is exposed to credit risk through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through its operating services activities (such as cash management and clearing activities), securities financing activities, investment securities portfolio, and cash placed with banks.

Credit risk management is an independent risk management function that monitors, measures and manages credit risk throughout the Firm and defines credit risk policies and procedures. The credit risk function reports to the Firm’s CRO. The Firm’s credit risk management governance includes the following activities:


•	Establishing a comprehensive credit risk policy framework


•	Monitoring, measuring and managing credit risk across all portfolio segments, including transaction and exposure approval


•	Setting industry concentration limits and establishing underwriting guidelines


•	Assigning and managing credit authorities in connection with the approval of all credit exposure


•	Managing criticized exposures and delinquent loans


•	Estimating credit losses and ensuring appropriate credit risk-based capital management

Risk identification and measurement

The Credit Risk Management function monitors, measures, manages and limits credit risk across the Firm’s businesses. To measure credit risk, the Firm employs several methodologies for estimating the likelihood of obligor or counterparty default. Methodologies for measuring credit risk vary depending on several factors, including type of asset (e.g., consumer versus wholesale), risk measurement parameters (e.g., delinquency status and borrower’s credit score versus wholesale risk-rating) and risk management and collection processes (e.g., retail collection center versus centrally managed workout groups). Credit risk measurement is based on the probability of default of an obligor or counterparty, the loss severity given a default event and the exposure at default.

Based on these factors and related market-based inputs, the Firm estimates credit losses for its exposures. Probable credit losses inherent in the consumer and wholesale held-for-investment loan portfolios are reflected in the allowance for loan losses, and probable credit losses inherent in lending-related commitments are reflected in the allowance for lending-related commitments. These losses are estimated using statistical analyses and other factors as described in Note 13. In addition, potential and unexpected credit losses are reflected in the allocation of credit risk capital and represent the potential volatility of actual losses relative to the established allowances for loan losses and lending-related commitments. The analyses for these losses include stress testing that considers alternative economic scenarios as described in the Stress testing section below. For further information, see Critical Accounting Estimates used by the Firm on pages 138–140.

The methodologies used to estimate credit losses depend on the characteristics of the credit exposure, as described below.

Scored exposure

The scored portfolio is generally held in CCB and predominantly includes residential real estate loans, credit card loans, and certain auto and business banking loans. For the scored portfolio, credit loss estimates are based on statistical analysis of credit losses over discrete periods of time. The statistical analysis uses portfolio modeling, credit scoring, and decision-support tools, which consider loan-level factors such as delinquency status, credit scores, collateral values, and other risk factors. Credit loss analyses also consider, as appropriate, uncertainties and other factors, including those related to current macroeconomic and political conditions, the quality of underwriting standards, and other internal and external factors. The factors and analysis are updated on a quarterly basis or more frequently as market conditions dictate.

Risk-rated exposure

Risk-rated portfolios are generally held in CIB, CB and AWM, but also include certain business banking and auto dealer loans held in CCB that are risk-rated because they have characteristics similar to commercial loans. For the risk-rated portfolio, credit loss estimates are based on estimates of the probability of default (“PD”) and loss severity given a default. The probability of default is the likelihood that a borrower will default on its obligation; the loss given default (“LGD”) is the estimated loss on the loan that would be realized upon the default and takes into consideration collateral and structural support for each credit facility. The estimation process includes assigning risk ratings to each borrower and credit facility to differentiate risk within the portfolio. These risk ratings are reviewed regularly by Credit Risk Management and revised as needed to reflect the borrower’s current financial position, risk profile and related collateral. The calculations and assumptions are

based on both internal and external historical experience and management judgment and are reviewed regularly.

Stress testing

Stress testing is important in measuring and managing credit risk in the Firm’s credit portfolio. The process assesses the potential impact of alternative economic and business scenarios on estimated credit losses for the Firm. Economic scenarios and the underlying parameters are defined centrally, articulated in terms of macroeconomic factors and applied across the businesses. The stress test results may indicate credit migration, changes in delinquency trends and potential losses in the credit portfolio. In addition to the periodic stress testing processes, management also considers additional stresses outside these scenarios, including industry and country- specific stress scenarios, as necessary. The Firm uses stress testing to inform decisions on setting risk appetite both at a Firm and LOB level, as well as to assess the impact of stress on individual counterparties.

Risk monitoring and management

The Firm has developed policies and practices that are designed to preserve the independence and integrity of the approval and decision-making process of extending credit to ensure credit risks are assessed accurately, approved properly, monitored regularly and managed actively at both the transaction and portfolio levels. The policy framework establishes credit approval authorities, concentration limits, risk-rating methodologies, portfolio review parameters and guidelines for management of distressed exposures. In addition, certain models, assumptions and inputs used in evaluating and monitoring credit risk are independently validated by groups that are separate from the line of businesses.

Consumer credit risk is monitored for delinquency and other trends, including any concentrations at the portfolio level, as certain of these trends can be modified through changes in underwriting policies and portfolio guidelines. Consumer Risk Management evaluates delinquency and other trends against business expectations, current and forecasted economic conditions, and industry benchmarks. Historical and forecasted economic performance and trends are incorporated into the modeling of estimated consumer credit losses and are part of the monitoring of the credit risk profile of the portfolio.

Wholesale credit risk is monitored regularly at an aggregate portfolio, industry, and individual client and counterparty level with established concentration limits that are reviewed and revised as deemed appropriate by management, typically on an annual basis. Industry and counterparty limits, as measured in terms of exposure and economic risk appetite, are subject to stress-based loss constraints. In addition, wrong-way risk — the risk that exposure to a counterparty is positively correlated with the impact of a default by the same counterparty, which could cause exposure to increase at the same time as the counterparty’s capacity to meet its obligations is decreasing — is actively

monitored as this risk could result in greater exposure at default compared with a transaction with another counterparty that does not have this risk.

Management of the Firm’s wholesale credit risk exposure is accomplished through a number of means, including:


•	Loan underwriting and credit approval process


•	Loan syndications and participations


•	Loan sales and securitizations


•	Credit derivatives


•	Master netting agreements


•	Collateral and other risk-reduction techniques

In addition to Credit Risk Management, an independent Credit Review function is responsible for:


•	Independently validating or changing the risk grades assigned to exposures in the Firm’s wholesale and commercial-oriented retail credit portfolios, and assessing the timeliness of risk grade changes initiated by responsible business units; and


•	Evaluating the effectiveness of business units’ credit management processes, including the adequacy of credit analyses and risk grading/LGD rationales, proper monitoring and management of credit exposures, and compliance with applicable grading policies and underwriting guidelines.

For further discussion of consumer and wholesale loans, see Note 12.

Risk reporting

To enable monitoring of credit risk and effective decision-making, aggregate credit exposure, credit quality forecasts, concentration levels and risk profile changes are reported regularly to senior members of Credit Risk Management. Detailed portfolio reporting of industry; clients, counterparties and customers; product and geographic concentrations occurs monthly, and the appropriateness of the allowance for credit losses is reviewed by senior management at least on a quarterly basis. Through the risk reporting and governance structure, credit risk trends and limit exceptions are provided regularly to, and discussed with, risk committees, senior management and the Board of Directors as appropriate.

In the following tables, reported loans include loans retained (i.e., held-for-investment); loans held-for-sale; and certain loans accounted for at fair value. The following tables do not include certain loans the Firm accounts for at fair value and classifies as trading assets. For further information regarding these loans, see Note 2 and Note 3. For additional information on the Firm’s loans, lending-related commitments, and derivative receivables, including the Firm’s accounting policies, see Note 12, Note 27, and Note 5, respectively.

For further information regarding the credit risk inherent in the Firm’s cash placed with banks, investment securities portfolio, and securities financing portfolio, see Note 4, Note 10, and Note 11, respectively.

For discussion of the consumer credit environment and consumer loans, see Consumer Credit Portfolio on pages 102-107 and Note 12. For discussion of the wholesale credit environment and wholesale loans, see Wholesale Credit Portfolio on pages 108–116 and Note 12.



Total credit portfolio
December 31, (in millions)	Credit exposure							Nonperforming^(e)(f)
	2017			2016				2017		2016
Loans retained	$	924,838		$	889,907			$	5,943	$	6,721
Loans held-for-sale	3,351			2,628				—		162
Loans at fair value	2,508			2,230				—		—
Total loans – reported	930,697			894,765				5,943		6,883
Derivative receivables	56,523			64,078				130		223
Receivables from customers and other ^(a)	26,272			17,560				—		—
Total credit-related assets	1,013,492			976,403				6,073		7,106
Assets acquired in loan satisfactions
Real estate owned	NA			NA				311		370
Other	NA			NA				42		59
Total assets acquired in loan satisfactions	NA			NA				353		429
Lending-related commitments	991,482			975,152			^(d)	731		506
Total credit portfolio	$	2,004,974		$	1,951,555		^(d)	$	7,157	$	8,041
Credit derivatives used in credit portfolio management activities^(b)	$	(17,609	)	$	(22,114	)		$	—	$	—
Liquid securities and other cash collateral held against derivatives^(c)	(16,108		)	(22,705		)		NA		NA



Year ended December 31, (in millions, except ratios)	2017			2016
Net charge-offs^(g)	$	5,387		$	4,692
Average retained loans
Loans	898,979			861,345
Loans – reported, excluding residential real estate PCI loans	865,887			822,973
Net charge-off rates^(g)
Loans	0.60		%	0.54		%
Loans – excluding PCI	0.62			0.57


(a)	Receivables from customers and other primarily represents held-for-investment margin loans to brokerage customers.


(b)	Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on pages 115–116 and Note 5.


(c)	Includes collateral related to derivative instruments where an appropriate legal opinion has not been either sought or obtained.


(d)	The prior period amounts have been revised to conform with the current period presentation.


(e)	Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing.

(f)

At December 31, 2017 and 2016, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $4.3 billion and $5.0 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of zero and $263 million, respectively, that are 90 or more days past due; and (3) Real estate owned (“REO”) insured by U.S. government agencies of $95 million and $142 million, respectively. These amounts have been excluded based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council (“FFIEC”).


(g)	For the year ended December 31, 2017, excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for loans would have been 0.55% and for loans - excluding PCI would have been 0.57%.



Consumer credit portfolio
As of or for the year ended December 31, (in millions, except ratios)	Credit exposure					Nonaccrual loans^(k)(l)				Net charge-offs/(recoveries)^(e)(m)(n)					Average annual net charge-off rate^(e)(m)(n)
	2017		2016			2017		2016		2017			2016		2017		2016
Consumer, excluding credit card
Loans, excluding PCI loans and loans held-for-sale
Residential mortgage^(a)	$	216,496	$	192,486		$	2,175	$	2,256	$	(10	)	$	16	—	%	0.01	%
Home equity	33,450		39,063			1,610		1,845		69			189		0.19		0.45
Auto^(b)(c)	66,242		65,814			141		214		331			285		0.51		0.45
Consumer & Business Banking^(a)(c)(d)	25,789		24,307			283		287		257			257		1.03		1.10
Student^(a)(e)	—		7,057			—		165		498			162		NM		2.13
Total loans, excluding PCI loans and loans held-for-sale	341,977		328,727			4,209		4,767		1,145			909		0.34		0.28
Loans – PCI
Home equity	10,799		12,902			NA		NA		NA			NA		NA		NA
Prime mortgage	6,479		7,602			NA		NA		NA			NA		NA		NA
Subprime mortgage	2,609		2,941			NA		NA		NA			NA		NA		NA
Option ARMs^(f)	10,689		12,234			NA		NA		NA			NA		NA		NA
Total loans – PCI	30,576		35,679			NA		NA		NA			NA		NA		NA
Total loans – retained	372,553		364,406			4,209		4,767		1,145			909		0.31		0.25
Loans held-for-sale	128		238			—		53		—			—		—		—
Total consumer, excluding credit card loans	372,681		364,644			4,209		4,820		1,145			909		0.31		0.25
Lending-related commitments^(g)	48,553		53,247		^(j)
Receivables from customers^(h)	133		120
Total consumer exposure, excluding credit card	421,367		418,011		^(j)
Credit Card
Loans retained⁽ⁱ⁾	149,387		141,711			—		—		4,123			3,442		2.95		2.63
Loans held-for-sale	124		105			—		—		—			—		—		—
Total credit card loans	149,511		141,816			—		—		4,123			3,442		2.95		2.63
Lending-related commitments^(g)	572,831		553,891
Total credit card exposure	722,342		695,707
Total consumer credit portfolio	$	1,143,709	$	1,113,718	^(j)	$	4,209	$	4,820	$	5,268		$	4,351	1.04	%	0.89	%
Memo: Total consumer credit portfolio, excluding PCI	$	1,113,133	$	1,078,039	^(j)	$	4,209	$	4,820	$	5,268		$	4,351	1.11	%	0.96	%

Consumer loan balances increased from December 31, 2016 predominantly due to originations of high-quality prime mortgage loans that have been retained on the balance sheet, partially offset by the sale of the student loan portfolio as well as paydowns and the charge-off or liquidation of delinquent loans.

PCI loans are excluded from the following discussions of individual loan products and are addressed separately below. For further information about the Firm’s consumer portfolio, including information about delinquencies, loan modifications and other credit quality indicators, see

Note 12.

Residential mortgage: The residential mortgage portfolio predominantly consists of high-quality prime mortgage loans with a small component (approximately 1%) of subprime mortgage loans. These subprime mortgage loans continue to run-off and are performing in line with expectations. The residential mortgage portfolio, including loans held-for-sale, increased from December 31, 2016 due to retained originations of primarily high-quality fixed rate prime mortgage loans partially offset by paydowns. Residential mortgage 30+ day delinquencies increased from December 31, 2016 due to the impact of recent hurricanes. Nonaccrual loans decreased from the prior year primarily as a result of loss mitigation activities. There was a net recovery for the year ended December 31, 2017 compared to a net charge-off for the year ended December 31, 2016, reflecting continued improvement in home prices and delinquencies.

At December 31, 2017 and 2016, the Firm’s residential mortgage portfolio, including loans held-for-sale, included $8.6 billion and $9.5 billion, respectively, of mortgage loans insured and/or guaranteed by U.S. government agencies, of which $6.2 billion and $7.0 billion, respectively, were 30 days or more past due (of these past due loans, $4.3 billion and $5.0 billion, respectively, were 90 days or more past due). The Firm monitors its exposure to certain potential unrecoverable claim payments related to government insured loans and considers this exposure in estimating the allowance for loan losses.

At December 31, 2017 and 2016, the Firm’s residential mortgage portfolio included $20.2 billion and $19.1 billion, respectively, of interest-only loans. These loans have an interest-only payment period generally followed by an adjustable-rate or fixed-rate fully amortizing payment period to maturity and are typically originated as higher-balance loans to higher-income borrowers. To date, losses on this portfolio generally have been consistent with the broader residential mortgage portfolio. The Firm continues to monitor the risks associated with these loans.

Home equity: The home equity portfolio declined from December 31, 2016 primarily reflecting loan paydowns. The amount of 30+ day delinquencies decreased from December 31, 2016 but was impacted by recent hurricanes. Nonaccrual loans decreased from December 31, 2016 primarily as a result of loss mitigation activities. Net charge-offs for the year ended December 31, 2017 declined when compared with the prior year, partially as a result of lower loan balances.

At December 31, 2017, approximately 90% of the Firm’s home equity portfolio consists of home equity lines of credit (“HELOCs”) and the remainder consists of home equity loans (“HELOANs”). HELOANs are generally fixed-rate, closed-end, amortizing loans, with terms ranging from 3–30 years. In general, HELOCs originated by the Firm are revolving loans for a 10-year period, after which time the HELOC recasts into a loan with a 20-year amortization period.

The carrying value of HELOCs outstanding was $30 billion at December 31, 2017. Of such amounts, $14 billion have recast from interest-only to fully amortizing payments or have been modified and $5 billion are interest-only balloon HELOCs, which primarily mature after 2030. The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are exhibiting a material deterioration in their credit risk profile.

The Firm monitors risks associated with junior lien loans where the borrower has a senior lien loan that is more than 90 days delinquent or has been modified. These loans are considered “high-risk seconds” and are classified as nonaccrual as they are considered to pose a higher risk of default than other junior lien loans. At December 31, 2017, the Firm estimated that the carrying value of its home equity portfolio contained approximately $725 million of current junior lien loans that were considered high-risk seconds, compared with $1.1 billion at December 31, 2016. For further information, see Note 12.

Auto: The auto loan portfolio, which predominantly consists of prime-quality loans, was relatively flat compared with December 31, 2016, as new originations were largely offset by paydowns and the charge-off or liquidation of delinquent loans. Nonaccrual loans decreased compared with December 31, 2016. Net charge-offs for the year ended December 31, 2017 increased compared with the prior year, primarily as a result of an incremental adjustment recorded in accordance with regulatory guidance regarding the timing of loss recognition for certain loans in bankruptcy and loans where assets were acquired in loan satisfaction.

Consumer & Business banking: Consumer & Business Banking loans increased compared with December 31, 2016 as growth due to loan originations was partially offset by paydowns and the charge-off or liquidation of delinquent loans. Nonaccrual loans and net charge-offs were relatively flat compared with prior year.

Student: The Firm wrote down and subsequently sold the student loan portfolio during 2017. Net charge-offs for the year ended December 31, 2017 increased as a result of the write-down.

Purchased credit-impaired loans: PCI loans decreased as the portfolio continues to run off. As of December 31, 2017, approximately 11% of the option ARM PCI loans were delinquent and approximately 68% of the portfolio had been modified into fixed-rate, fully amortizing loans. The borrowers for substantially all of the remaining loans are making amortizing payments, although such payments are not necessarily fully amortizing. This latter group of loans is subject to the risk of payment shock due to future payment recast. Default rates generally increase on option ARM loans when payment recast results in a payment increase. The expected increase in default rates is considered in the Firm’s quarterly impairment assessment.

Geographic composition of residential real estate loans

At December 31, 2017, $152.8 billion, or 63% of the total retained residential real estate loan portfolio, excluding mortgage loans insured by U.S. government agencies and PCI loans, were concentrated in California, New York, Illinois, Texas and Florida, compared with $139.9 billion, or 63%, at December 31, 2016. For additional information on the geographic composition of the Firm’s residential real estate loans, see Note 12.

Current estimated loan-to-values of residential real estate loans

Average current estimated loan-to-value (“LTV”) ratios have declined consistent with improvements in home prices, customer pay downs, and charge-offs or liquidations of higher LTV loans. For further information on current estimated LTVs of residential real estate loans, see Note 12.

Loan modification activities for residential real estate loans

The performance of modified loans generally differs by product type due to differences in both the credit quality and the types of modifications provided. Performance metrics for modifications to the residential real estate portfolio, excluding PCI loans, that have been seasoned more than six months show weighted-average redefault rates of 24% for residential mortgages and 21% for home equity. The cumulative performance metrics for modifications to the PCI residential real estate portfolio that have been seasoned more than six months show weighted average redefault rates of 20% for home equity, 19% for prime mortgages, 16% for option ARMs and 34% for subprime mortgages. The cumulative redefault rates reflect the performance of modifications completed under both the U.S. Government’s Home Affordable Modification Program (“HAMP”) and the Firm’s proprietary modification programs

(primarily the Firm’s modification program that was modeled after HAMP) from October 1, 2009, through December 31, 2017.

Certain loans that were modified under HAMP and the Firm’s proprietary modification programs have interest rate reset provisions (“step-rate modifications”). Interest rates on these loans generally began to increase commencing in 2014 by 1% per year, and will continue to do so until the rate reaches a specified cap. The cap on these loans is typically at a prevailing market interest rate for a fixed-rate mortgage loan as of the modification date. At December 31, 2017, the carrying value of non-PCI loans and the unpaid principal balance of PCI loans modified in step-rate modifications, which have not yet met their specified caps, were $3 billion and $7 billion, respectively. The Firm continues to monitor this risk exposure and the impact of these potential interest rate increases is considered in the Firm’s allowance for loan losses.

The following table presents information as of December 31, 2017 and 2016, relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty. For further information on modifications for the years ended December 31, 2017 and 2016, see Note 12.



Modified residential real estate loans
	2017				2016
December 31, (in millions)	Retained loans		Nonaccrual retained loans^(d)		Retained loans		Nonaccrual retained loans^(d)
Modified residential real estate loans, excluding PCI loans^(a)(b)
Residential mortgage	5,620		1,743		6,032		1,755
Home equity	$	2,118	$	1,032	$	2,264	$	1,116
Total modified residential real estate loans, excluding PCI loans	$	7,738	$	2,775	$	8,296	$	2,871
Modified PCI loans^(c)
Home equity	$	2,277	NA		$	2,447	NA
Prime mortgage	4,490		NA		5,052		NA
Subprime mortgage	2,678		NA		2,951		NA
Option ARMs	8,276		NA		9,295		NA
Total modified PCI loans	$	17,721	NA		$	19,745	NA


(a)	Amounts represent the carrying value of modified residential real estate loans.

(b)

At December 31, 2017 and 2016, $3.8 billion and $3.4 billion, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., Federal Housing Administration (“FHA”), U.S. Department of Veterans Affairs (“VA”), Rural Housing Service of the U.S. Department of Agriculture (“RHS”)) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure. For additional information about sales of loans in securitization transactions with Ginnie Mae, see Note 14.


(c)	Amounts represent the unpaid principal balance of modified PCI loans.


(d)	As of December 31, 2017 and 2016, nonaccrual loans included $2.2 billion and $2.3 billion, respectively, of troubled debt restructuring (“TDRs”) for which the borrowers were less than 90 days past due. For additional information about loans modified in a TDR that are on nonaccrual status, see Note 12.

Nonperforming assets

The following table presents information as of December 31, 2017 and 2016, about consumer, excluding credit card, nonperforming assets.



Nonperforming assets^(a)
December 31, (in millions)	2017		2016
Nonaccrual loans^(b)
Residential real estate^(c)	$	3,785	$	4,154
Other consumer^(c)	424		666
Total nonaccrual loans	4,209		4,820
Assets acquired in loan satisfactions
Real estate owned	225		292
Other	40		57
Total assets acquired in loan satisfactions	265		349
Total nonperforming assets	$	4,474	$	5,169

(a)


(b)	Excludes PCI loans which are accounted for on a pool basis. Since each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, the past-due status of the pools, or that of individual loans within the pools, is not meaningful. The Firm is recognizing interest income on each pool of loans as each of the pools is performing.


(c)	Certain loan portfolios have been reclassified. The prior period amounts have been revised to conform with the current period presentation.

Nonaccrual loans in the residential real estate portfolio at December 31, 2017 decreased to $3.8 billion from $4.2 billion at December 31, 2016, of which 26% and 29% were greater than 150 days past due, respectively. In the aggregate, the unpaid principal balance of residential real estate loans greater than 150 days past due was charged down by approximately 40% and 43% to the estimated net realizable value of the collateral at December 31, 2017 and 2016, respectively.

Active and suspended foreclosure: For information on loans that were in the process of active or suspended foreclosure, see Note 12.

Nonaccrual loans: The following table presents changes in the consumer, excluding credit card, nonaccrual loans for the years ended December 31, 2017 and 2016.



Nonaccrual loan activity
Year ended December 31,
(in millions)	2017			2016
Beginning balance	$	4,820		$	5,413
Additions	3,525			3,858
Reductions:
Principal payments and other^(a)	1,577			1,437
Charge-offs	699			843
Returned to performing status	1,509			1,589
Foreclosures and other liquidations	351			582
Total reductions	4,136			4,451
Net changes	(611		)	(593		)
Ending balance	$	4,209		$	4,820


(a)	Other reductions includes loan sales.

Credit card

Total credit card loans increased from December 31, 2016 due to strong new account growth and higher sales volume. The December 31, 2017 30+ day delinquency rate increased to 1.80% from 1.61% at December 31, 2016, while the December 31, 2017 90+ day delinquency rate increased to 0.92% from 0.81% at December 31, 2016, in line with expectations. Net charge-offs increased for the year ended December 31, 2017 primarily due to growth in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio. The credit card portfolio continues to reflect a largely well-seasoned portfolio that has strong U.S. geographic diversification.

Loans outstanding in the top five states of California, Texas, New York, Florida and Illinois consisted of $67.2 billion in receivables, or 45% of the retained loan portfolio, at December 31, 2017, compared with $62.8 billion, or 44%, at December 31, 2016. For more information on the geographic and FICO composition of the Firm’s credit card loans, see Note 12.

Modifications of credit card loans

At both December 31, 2017 and 2016, the Firm had $1.2 billion of credit card loans outstanding that have been modified in TDRs. These balances included both credit card loans with modified payment terms and credit card loans that reverted back to their pre-modification payment terms because the cardholder did not comply with the modified payment terms.

Consistent with the Firm’s policy, all credit card loans typically remain on accrual status until charged off. However, the Firm establishes an allowance, which is offset against loans and charged to interest income, for the estimated uncollectible portion of accrued and billed interest and fee income.

For additional information about loan modification programs to borrowers, see Note 12.

In its wholesale businesses, the Firm is exposed to credit risk through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through its operating services activities (such as cash management and clearing activities), securities financing activities, investment securities portfolio, and cash placed with banks. A portion of the loans originated or acquired by the Firm’s wholesale businesses is generally retained on the balance sheet. The Firm distributes a significant percentage of the loans it originates into the market as part of its syndicated loan business and to manage portfolio concentrations and credit risk.

The wholesale credit portfolio was stable for the year ended December 31, 2017, characterized by low levels of criticized exposure, nonaccrual loans and charge-offs. See industry discussion on pages 109–112 for further information. The increase in retained loans was driven by new originations in CB and higher loans to Private Banking clients in AWM, which was partially offset by paydowns in CIB. Discipline in underwriting across all areas of lending continues to be a key point of focus. The wholesale portfolio is actively managed, in part by conducting ongoing, in-depth reviews of client credit quality and transaction structure inclusive of collateral where applicable, and of industry, product and client concentrations.

In the following tables, the Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate, and excludes all exposure managed by CCB.



Wholesale credit portfolio
December 31, (in millions)	Credit exposure						Nonperforming^(c)
December 31, (in millions)	2017			2016			2017		2016
Loans retained	$	402,898		$	383,790		$	1,734	$	1,954
Loans held-for-sale	3,099			2,285			—		109
Loans at fair value	2,508			2,230			—		—
Loans – reported	408,505			388,305			1,734		2,063
Derivative receivables	56,523			64,078			130		223
Receivables from customers and other^(a)	26,139			17,440			—		—
Total wholesale credit-related assets	491,167			469,823			1,864		2,286
Lending-related commitments	370,098			368,014			731		506
Total wholesale credit exposure	$	861,265		$	837,837		$	2,595	$	2,792
Credit derivatives used in credit portfolio management activities^(b)	$	(17,609	)	$	(22,114	)	$	—	$	—
Liquid securities and other cash collateral held against derivatives	(16,108		)	(22,705		)	NA		NA


(a)	Receivables from customers and other include $26.0 billion and $17.3 billion of held-for-investment margin loans at December 31, 2017 and 2016, respectively, to brokerage customers in CIB Prime Services and in AWM; these are classified in accrued interest and accounts receivable on the Consolidated balance sheets.


(b)	Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on pages 115–116, and Note 5.


(c)	Excludes assets acquired in loan satisfactions.



Wholesale credit exposure – industries^(a)
											Selected metrics
											30 days or more past due and accruing loans		Net charge-offs/ (recoveries)			Credit derivative hedges^(f)			Liquid securities and other cash collateral held against derivative receivables
					Noninvestment-grade
	Credit exposure^(e)		Investment- grade		Noncriticized		Criticized performing		Criticized nonperforming
As of or for the year ended December 31, 2017 (in millions)
Real Estate	$	139,409	$	115,401	$	23,012	$	859	$	137	$	254	$	(4	)	$	—		$	(2	)
Consumer & Retail	87,679		55,737		29,619		1,791		532		30		34			(275		)	(9		)
Technology, Media & Telecommunications	59,274		36,510		20,453		2,258		53		14		(12		)	(910		)	(19		)
Healthcare	55,997		42,643		12,731		585		38		82		(1		)	—			(207		)
Industrials	55,272		37,198		16,770		1,159		145		150		(1		)	(196		)	(21		)
Banks & Finance Cos	49,037		34,654		13,767		612		4		1		6			(1,216		)	(3,174		)
Oil & Gas	41,317		21,430		14,854		4,046		987		22		71			(747		)	(1		)
Asset Managers	32,531		28,029		4,484		4		14		27		—			—			(5,290		)
Utilities	29,317		24,486		4,383		227		221		—		11			(160		)	(56		)
State & Municipal Govt^(b)	28,633		27,977		656		—		—		12		5			(130		)	(524		)
Central Govt	19,182		18,741		376		65		—		4		—			(10,095		)	(2,520		)
Chemicals & Plastics	15,945		11,107		4,764		74		—		4		—			—			—
Transportation	15,797		9,870		5,302		527		98		9		14			(32		)	(131		)
Automotive	14,820		9,321		5,278		221		—		10		1			(284		)	—
Metals & Mining	14,171		6,989		6,822		321		39		3		(13		)	(316		)	(1		)
Insurance	14,089		11,028		2,981		—		80		1		—			(157		)	(2,195		)
Financial Markets Infrastructure	5,036		4,775		261		—		—		—		—			—			(23		)
Securities Firms	4,113		2,559		1,553		1		—		—		—			(274		)	(335		)
All other^(c)	147,900		134,110		13,283		260		247		901		8			(2,817		)	(1,600		)
Subtotal	$	829,519	$	632,565	$	181,349	$	13,010	$	2,595	$	1,524	$	119		$	(17,609	)	$	(16,108	)
Loans held-for-sale and loans at fair value	5,607
Receivables from customers and other	26,139
Total^(d)	$	861,265




											Selected metrics
											30 days or more past due and accruing loans		Net charge-offs/ (recoveries)			Credit derivative hedges^(f)			Liquid securities and other cash collateral held against derivative receivables^(g)
					Noninvestment-grade
	Credit exposure^(e)		Investment- grade		Noncriticized		Criticized performing		Criticized nonperforming
As of or for the year ended December 31, 2016 (in millions)
Real Estate	$	134,287	$	104,869	$	28,281	$	937	$	200	$	206	$	(7	)	$	(54	)	$	(11	)
Consumer & Retail	84,804		54,730		28,255		1,571		248		75		24			(424		)	(69		)
Technology, Media & Telecommunications	63,324		39,998		21,751		1,559		16		9		2			(589		)	(30		)
Healthcare	49,445		39,244		9,279		882		40		86		37			(286		)	(246		)
Industrials	55,733		36,710		17,854		1,033		136		128		3			(434		)	(40		)
Banks & Finance Cos	48,393		35,385		12,560		438		10		21		(2		)	(1,336		)	(7,337		)
Oil & Gas	40,367		18,629		12,274		8,069		1,395		31		233			(1,532		)	(18		)
Asset Managers	33,201		29,194		4,006		1		—		17		—			—			(5,737		)
Utilities	29,672		24,203		4,959		424		86		8		—			(306		)	—
State & Municipal Govt^(b)	28,263		27,603		624		6		30		107		(1		)	(130		)	—
Central Govt	20,408		20,123		276		9		—		4		—			(11,691		)	(4,183		)
Chemicals & Plastics	15,043		10,405		4,452		156		30		3		—			(35		)	(3		)
Transportation	19,096		12,178		6,421		444		53		9		10			(93		)	(188		)
Automotive	16,736		9,235		7,299		201		1		7		—			(401		)	(14		)
Metals & Mining	13,419		5,523		6,744		1,133		19		—		36			(621		)	(62		)
Insurance	13,510		10,918		2,459		—		133		9		—			(275		)	(2,538		)
Financial Markets Infrastructure	8,732		7,980		752		—		—		—		—			—			(390		)
Securities Firms	4,211		1,812		2,399		—		—		—		—			(273		)	(491		)
All other^(c)	137,238		124,661		11,988		303		286		598		6			(3,634		)	(1,348		)
Subtotal	$	815,882	$	613,400	$	182,633	$	17,166	$	2,683	$	1,318	$	341		$	(22,114	)	$	(22,705	)
Loans held-for-sale and loans at fair value	4,515
Receivables from customers and other	17,440
Total^(d)	$	837,837

In the normal course of its wholesale business, the Firm provides loans to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals. For further discussion on loans, including information on credit quality indicators and sales of loans, see Note 12.

The following table presents the change in the nonaccrual loan portfolio for the years ended December 31, 2017 and 2016.



Wholesale nonaccrual loan activity^(a)
Year ended December 31, (in millions)	2017			2016
Beginning balance	$	2,063		$	1,016
Additions	1,482			2,981
Reductions:
Paydowns and other	1,137			1,148
Gross charge-offs	200			385
Returned to performing status	189			242
Sales	285			159
Total reductions	1,811			1,934
Net changes	(329		)	1,047
Ending balance	$	1,734		$	2,063

(a) Loans are placed on nonaccrual status when management believes full payment of principal or interest is not expected, regardless of delinquency status, or when principal or interest have been in default for a period of 90 days or more unless the loan is both well-secured and in the process of collection.

The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the years ended December 31, 2017 and 2016. The amounts in the table below do not include gains or losses from sales of nonaccrual loans.



Wholesale net charge-offs/(recoveries)
Year ended December 31, (in millions, except ratios)	2017			2016
Loans – reported
Average loans retained	$	392,263		$	371,778
Gross charge-offs	212			398
Gross recoveries	(93		)	(57		)
Net charge-offs	119			341
Net charge-off rate	0.03		%	0.09		%

Lending-related commitments

The Firm uses lending-related financial instruments, such as commitments (including revolving credit facilities) and guarantees, to meet the financing needs of its clients. The contractual amounts of these financial instruments represent the maximum possible credit risk should the counterparties draw down on these commitments or the Firm fulfill its obligations under these guarantees, and the counterparties subsequently fail to perform according to the terms of these contracts. Most of these commitments and guarantees are refinanced, extended, cancelled, or expire without being drawn upon or a default occurring. In the Firm’s view, the total contractual amount of these wholesale lending-related commitments is not representative of the Firm’s expected future credit exposure or funding requirements. For further information on wholesale lending-related commitments, see Note 27.

Clearing services

The Firm provides clearing services for clients entering into securities and derivative transactions. Through the provision of these services the Firm is exposed to the risk of non-performance by its clients and may be required to share in losses incurred by central counterparties. Where possible, the Firm seeks to mitigate its credit risk to its clients through the collection of adequate margin at inception and throughout the life of the transactions and can also cease provision of clearing services if clients do not adhere to their obligations under the clearing agreement. For further discussion of clearing services, see Note 27.

In the normal course of business, the Firm uses derivative instruments predominantly for market-making activities. Derivatives enable counterparties to manage exposures to fluctuations in interest rates, currencies and other markets. The Firm also uses derivative instruments to manage its own credit and other market risk exposure. The nature of the counterparty and the settlement mechanism of the derivative affect the credit risk to which the Firm is exposed. For OTC derivatives the Firm is exposed to the credit risk of the derivative counterparty. For exchange-traded derivatives (“ETD”), such as futures and options, and “cleared” over-the-counter (“OTC-cleared”) derivatives, the Firm is generally exposed to the credit risk of the relevant CCP. Where possible, the Firm seeks to mitigate its credit risk exposures arising from derivative transactions through the use of legally enforceable master netting arrangements and collateral agreements. For further discussion of derivative contracts, counterparties and settlement types, see Note 5.

The following table summarizes the net derivative receivables for the periods presented.



Derivative receivables
December 31, (in millions)	2017			2016
Interest rate	$	24,673		$	28,302
Credit derivatives	869			1,294
Foreign exchange	16,151			23,271
Equity	7,882			4,939
Commodity	6,948			6,272
Total, net of cash collateral	56,523			64,078
Liquid securities and other cash collateral held against derivative receivables^(a)	(16,108		)	(22,705		)
Total, net of all collateral	$	40,415		$	41,373


(a)	Includes collateral related to derivative instruments where an appropriate legal opinion has not been either sought or obtained.

Derivative receivables reported on the Consolidated balance sheets were $56.5 billion and $64.1 billion at December 31, 2017 and 2016, respectively. Derivative receivables decreased predominantly as a result of client-driven market-making activities in CIB Markets, which reduced foreign exchange and interest rate derivative receivables, and increased equity derivative receivables, driven by market movements.

Derivative receivables amounts represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and cash collateral held by the Firm. However, in management’s view, the appropriate measure of current credit risk should also take into consideration additional liquid securities (primarily U.S. government and agency securities and other group of seven nations (“G7”) government bonds) and other cash collateral held by the Firm aggregating $16.1 billion and $22.7 billion at December 31, 2017 and 2016, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor.

In addition to the collateral described in the preceding paragraph, the Firm also holds additional collateral (primarily cash, G7 government securities, other liquid government-agency and guaranteed securities, and corporate debt and equity securities) delivered by clients at the initiation of transactions, as well as collateral related to contracts that have a non-daily call frequency and collateral that the Firm has agreed to return but has not yet settled as of the reporting date. Although this collateral does not reduce the balances and is not included in the table above, it is available as security against potential exposure that could arise should the fair value of the client’s derivative transactions move in the Firm’s favor. The derivative receivables fair value, net of all collateral, also does not include other credit enhancements, such as letters of credit. For additional information on the Firm’s use of collateral agreements, see Note 5.

While useful as a current view of credit exposure, the net fair value of the derivative receivables does not capture the potential future variability of that credit exposure. To capture the potential future variability of credit exposure, the Firm calculates, on a client-by-client basis, three measures of potential derivatives-related credit loss: Peak, Derivative Risk Equivalent (“DRE”), and Average exposure (“AVG”). These measures all incorporate netting and collateral benefits, where applicable.

Peak represents a conservative measure of potential exposure to a counterparty calculated in a manner that is broadly equivalent to a 97.5% confidence level over the life of the transaction. Peak is the primary measure used by the Firm for setting of credit limits for derivative transactions, senior management reporting and derivatives exposure management. DRE exposure is a measure that expresses the risk of derivative exposure on a basis intended to be equivalent to the risk of loan exposures. DRE is a less extreme measure of potential credit loss than Peak and is used for aggregating derivative credit risk exposures with loans and other credit risk.

Finally, AVG is a measure of the expected fair value of the Firm’s derivative receivables at future time periods, including the benefit of collateral. AVG exposure over the total life of the derivative contract is used as the primary metric for pricing purposes and is used to calculate credit risk capital and the CVA, as further described below. The three year AVG exposure was $29.0 billion and $31.1 billion at December 31, 2017 and 2016, respectively, compared with derivative receivables, net of all collateral, of $40.4 billion and $41.4 billion at December 31, 2017 and 2016, respectively.

The fair value of the Firm’s derivative receivables incorporates CVA to reflect the credit quality of counterparties. CVA is based on the Firm’s AVG to a counterparty and the counterparty’s credit spread in the credit derivatives market. The Firm believes that active risk management is essential to controlling the dynamic credit risk in the derivatives portfolio. In addition, the Firm’s risk management process takes into consideration the potential

As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s over-the-counter derivatives transactions subject to collateral agreements — excluding foreign exchange spot trades, which are not typically covered by collateral agreements due to their short maturity and centrally cleared trades that are settled daily — was approximately 90% as of December 31, 2017, largely unchanged compared with December 31, 2016.

Credit derivatives

The Firm uses credit derivatives for two primary purposes: first, in its capacity as a market-maker, and second, as an end-user to manage the Firm’s own credit risk associated with various exposures. For a detailed description of credit derivatives, see Credit derivatives in Note 5.

Credit portfolio management activities

Included in the Firm’s end-user activities are credit derivatives used to mitigate the credit risk associated with traditional lending activities (loans and unfunded commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities). Information on credit portfolio management activities is provided in the table below. For further information on derivatives used in credit portfolio management activities, see Credit derivatives in Note 5.

The Firm also uses credit derivatives as an end-user to manage other exposures, including credit risk arising from certain securities held in the Firm’s market-making businesses. These credit derivatives are not included in credit portfolio management activities; for further information on these credit derivatives as well as credit derivatives used in the Firm’s capacity as a market-maker in credit derivatives, see Credit derivatives in Note 5.



Credit derivatives used in credit portfolio management activities
	Notional amount of protection purchased ^(a)
December 31, (in millions)	2017		2016
Credit derivatives used to manage:
Loans and lending-related commitments	$	1,867	$	2,430
Derivative receivables	15,742		19,684
Credit derivatives used in credit portfolio management activities	$	17,609	$	22,114


(a)	Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index.

The credit derivatives used in credit portfolio management activities do not qualify for hedge accounting under U.S. GAAP; these derivatives are reported at fair value, with gains and losses recognized in principal transactions revenue. In contrast, the loans and lending-related commitments being risk-managed are accounted for on an accrual basis. This asymmetry in accounting treatment,

between loans and lending-related commitments and the credit derivatives used in credit portfolio management activities, causes earnings volatility that is not representative, in the Firm’s view, of the true changes in value of the Firm’s overall credit exposure.

The effectiveness of credit default swaps (“CDS”) as a hedge against the Firm’s exposures may vary depending on a number of factors, including the named reference entity (i.e., the Firm may experience losses on specific exposures that are different than the named reference entities in the purchased CDS); the contractual terms of the CDS (which may have a defined credit event that does not align with an actual loss realized by the Firm); and the maturity of the Firm’s CDS protection (which in some cases may be shorter than the Firm’s exposures). However, the Firm generally seeks to purchase credit protection with a maturity date that is the same or similar to the maturity date of the exposure for which the protection was purchased, and remaining differences in maturity are actively monitored and managed by the Firm.

JPMorgan Chase’s allowance for credit losses covers the retained consumer and wholesale loan portfolios, as well as the Firm’s wholesale and certain consumer lending-related commitments.

For a further discussion of the components of the allowance for credit losses and related management judgments, see Critical Accounting Estimates Used by the Firm on pages 138–140 and Note 13.

At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm, and discussed with the Board of Directors’ Risk Policy Committee (“DRPC”) and the Audit Committee. As of December 31, 2017, JPMorgan Chase deemed the allowance for credit losses to be appropriate and sufficient to absorb probable credit losses inherent in the portfolio.

The allowance for credit losses decreased as of December 31, 2017, driven by:


•	a net reduction in the wholesale allowance, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines, and Metals & Mining portfolios (compared with additions to the allowance in the prior year driven by downgrades in the same portfolios)

largely offset by


•	a net increase in the consumer allowance, reflecting


–	additions to the allowance for the credit card and business banking portfolios, driven by loan growth in both of these portfolios and higher loss rates in the credit card portfolio,

largely offset by


–	a reduction in the allowance for the residential real estate portfolio, predominantly driven by continued improvement in home prices and delinquencies, and


–	the utilization of the allowance in connection with the sale of the student loan portfolio.

For additional information on the consumer and wholesale credit portfolios, see Consumer Credit Portfolio on pages 102-107, Wholesale Credit Portfolio on pages 108–116 and

Note 12.



Summary of changes in the allowance for credit losses
	2017												2016
Year ended December 31,	Consumer, excluding credit card			Credit card			Wholesale			Total			Consumer, excluding credit card			Credit card			Wholesale			Total
(in millions, except ratios)
Allowance for loan losses
Beginning balance at January 1,	$	5,198		$	4,034		$	4,544		$	13,776		$	5,806		$	3,434		$	4,315		$	13,555
Gross charge-offs	1,779			4,521			212			6,512			1,500			3,799			398			5,697
Gross recoveries	(634		)	(398		)	(93		)	(1,125		)	(591		)	(357		)	(57		)	(1,005		)
Net charge-offs^(a)	1,145			4,123			119			5,387			909			3,442			341			4,692
Write-offs of PCI loans^(b)	86			—			—			86			156			—			—			156
Provision for loan losses	613			4,973			(286		)	5,300			467			4,042			571			5,080
Other	(1		)	—			2			1			(10		)	—			(1		)	(11		)
Ending balance at December 31,	$	4,579		$	4,884		$	4,141		$	13,604		$	5,198		$	4,034		$	4,544		$	13,776
Impairment methodology
Asset-specific^(c)	$	246		$	383		$	461		$	1,090		$	308		$	358		$	342		$	1,008
Formula-based	2,108			4,501			3,680			10,289			2,579			3,676			4,202			10,457
PCI	2,225			—			—			2,225			2,311			—			—			2,311
Total allowance for loan losses	$	4,579		$	4,884		$	4,141		$	13,604		$	5,198		$	4,034		$	4,544		$	13,776
Allowance for lending-related commitments
Beginning balance at January 1,	$	26		$	—		$	1,052		$	1,078		$	14		$	—		$	772		$	786
Provision for lending-related commitments	7			—			(17		)	(10		)	—			—			281			281
Other	—			—			—			—			12			—			(1		)	11
Ending balance at December 31,	$	33		$	—		$	1,035		$	1,068		$	26		$	—		$	1,052		$	1,078
Impairment methodology
Asset-specific	$	—		$	—		$	187		$	187		$	—		$	—		$	169		$	169
Formula-based	33			—			848			881			26			—			883			909
Total allowance for lending-related commitments^(d)	$	33		$	—		$	1,035		$	1,068		$	26		$	—		$	1,052		$	1,078
Total allowance for credit losses	$	4,612		$	4,884		$	5,176		$	14,672		$	5,224		$	4,034		$	5,596		$	14,854
Memo:
Retained loans, end of period	$	372,553		$	149,387		$	402,898		$	924,838		$	364,406		$	141,711		$	383,790		$	889,907
Retained loans, average	366,798			139,918			392,263			898,979			358,486			131,081			371,778			861,345
PCI loans, end of period	30,576			—			3			30,579			35,679			—			3			35,682
Credit ratios
Allowance for loan losses to retained loans	1.23		%	3.27		%	1.03		%	1.47		%	1.43		%	2.85		%	1.18		%	1.55		%
Allowance for loan losses to retained nonaccrual loans^(e)	109			NM			239			229			109			NM			233			205
Allowance for loan losses to retained nonaccrual loans excluding credit card	109			NM			239			147			109			NM			233			145
Net charge-off rate^(a)	0.31			2.95			0.03			0.60			0.25			2.63			0.09			0.54
Credit ratios, excluding residential real estate PCI loans
Allowance for loan losses to retained loans	0.69			3.27			1.03			1.27			0.88			2.85			1.18			1.34
Allowance for loan losses to retained nonaccrual loans^(e)	56			NM			239			191			61			NM			233			171
Allowance for loan losses to retained nonaccrual loans excluding credit card	56			NM			239			109			61			NM			233			111
Net charge-off rate^(a)	0.34		%	2.95		%	0.03		%	0.62		%	0.28		%	2.63		%	0.09		%	0.57		%

Provision for credit losses

The provision for credit losses decreased as of December 31, 2017 as a result of:


•	a net $422 million reduction in the wholesale allowance for credit losses, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines, and Metals & Mining portfolios, compared with an addition of $511 million in the prior year driven by downgrades in the same portfolios.

The decrease was predominantly offset by


•	a higher consumer provision driven by


–	$450 million of higher net charge-offs, primarily in the credit card portfolio due to growth in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio, partially offset by a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies,


–	a $218 million impact in connection with the sale of the student loan portfolio, and


–	a $416 million higher addition to the allowance for credit losses.

Current year additions to the consumer allowance included:


◦	an $850 million addition to the allowance for credit losses in the credit card portfolio, compared to a $600 million addition in the prior year, due to higher loss rates and loan growth in both years, and


◦	a $50 million addition to the allowance for credit losses in the business banking portfolio, driven by loan growth

the additions were partially offset by


◦	a $316 million net reduction in the allowance for credit losses in the residential real estate portfolio, compared to a $517 million net reduction in the prior year, reflecting continued improvement in home prices and delinquencies in both years.

Investment portfolio risk is the risk associated with the loss of principal or a reduction in expected returns on investments arising from the investment securities portfolio held by Treasury and CIO in connection with the Firm’s balance sheet or asset-liability management objectives or from principal investments managed in various LOBs in predominantly privately-held financial assets and instruments. Investments are typically intended to be held over extended periods and, accordingly, the Firm has no expectation for short-term realized gains with respect to these investments.

Investment securities risk

Investment securities risk includes the exposure associated with the default of principal plus coupon payments. This risk is minimized given that Treasury and CIO generally invest in high-quality securities. At December 31, 2017, the investment securities portfolio was $248.0 billion, and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available and where not available, based primarily upon internal ratings that correspond to ratings as defined by S&P and Moody’s). For further information on the investment securities portfolio, see Note 10 on pages 203-208. For further information on the market risk inherent in the portfolio, see Market Risk Management on pages 121-128. For further information on related liquidity risk, see Liquidity Risk on pages 92–97.

Governance and oversight

Investment securities risks are governed by the Firm’s Risk Appetite framework, and discussed at the CIO, Treasury and Corporate (CTC) Risk Committee with regular updates to the DRPC.

The Firm’s independent control functions are responsible for reviewing the appropriateness of the carrying value of investment securities in accordance with relevant policies. Approved levels for investment securities are established for each risk category, including capital and credit risks.

Principal investment risk

Principal investments are typically private non-traded financial instruments representing ownership or other forms of junior capital. Principal investments cover multiple asset classes and are made either in stand-alone investing businesses or as part of a broader business platform. As of December 31, 2017, the carrying value of the principal investment portfolios included tax-oriented investments (e.g., affordable housing and alternative energy investments) of $14.0 billion and private equity and various debt and equity instruments of $5.5 billion. Increasingly, new principal investment activity seeks to enhance or accelerate LOB strategic business initiatives. The Firm’s principal investments are managed under various LOBs and are reflected within the respective LOB financial results.

Governance and oversight

The Firm’s approach to managing principal risk is consistent with the Firm’s general risk governance structure. A Firmwide risk policy framework exists for all principal investing activities. All investments are approved by investment committees that include executives who are independent from the investing businesses.

The Firm’s independent control functions are responsible for reviewing the appropriateness of the carrying value of investments in accordance with relevant policies. Approved levels for investments are established for each relevant business in order to manage the overall size of the portfolios.

Industry, geographic and position level concentration limits have been set and are intended to ensure diversification of the portfolios. The Firm also conducts stress testing on these portfolios using specific scenarios that estimate losses based on significant market moves and/or other risk events.

Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.

Market Risk Management

Market Risk Management monitors market risks throughout the Firm and defines market risk policies and procedures. The Market Risk Management function reports to the Firm’s CRO.

Market Risk Management seeks to manage risk, facilitate efficient risk/return decisions, reduce volatility in operating performance and provide transparency into the Firm’s market risk profile for senior management, the Board of Directors and regulators. Market Risk Management is responsible for the following functions:


•	Establishment of a market risk policy framework


•	Independent measurement, monitoring and control of line of business and firmwide market risk


•	Definition, approval and monitoring of limits


•	Performance of stress testing and qualitative risk assessments

Risk measurement

Tools used to measure risk

There is no single measure to capture market risk and therefore the Firm uses various metrics, both statistical and nonstatistical, to assess risk including:


•	VaR


•	Economic-value stress testing


•	Nonstatistical risk measures


•	Loss advisories


•	Profit and loss drawdowns


•	Earnings-at-risk


•	Other sensitivities

Risk monitoring and control

Market risk exposure is managed primarily through a series of limits set in the context of the market environment and business strategy. In setting limits, the Firm takes into consideration factors such as market volatility, product liquidity and accommodation of client business, and management experience. The Firm maintains different levels of limits. Corporate level limits include VaR and stress limits. Similarly, line of business limits include VaR and stress limits and may be supplemented by loss advisories, nonstatistical measurements and profit and loss drawdowns. Limits may also be set within the lines of business, as well at the portfolio or legal entity level.

Market Risk Management sets limits and regularly reviews and updates them as appropriate, with any changes approved by line of business management and Market Risk Management. Senior management, including the Firm’s CEO and CRO, are responsible for reviewing and approving certain of these risk limits on an ongoing basis. All limits that have not been reviewed within specified time periods by Market Risk Management are escalated to senior management. The lines of business are responsible for adhering to established limits against which exposures are monitored and reported.

Limit breaches are required to be reported in a timely manner to limit approvers, Market Risk Management and senior management. In the event of a breach, Market Risk Management consults with senior management of the Firm and the line of business senior management to determine the appropriate course of action required to return the applicable positions to compliance, which may include a reduction in risk in order to remedy the breach. Certain Firm or line of business-level limits that have been breached for three business days or longer, or by more than 30%, are escalated to senior management and the Firmwide Risk Committee.



Risk identification and classification by line of business
Line of Business	Predominant business activities and related market risks	Positions included in Risk Management VaR	Positions included in earnings-at-risk	Positions included in other sensitivity-based measures
CCB	• Services mortgage loans which give rise to complex, non-linear interest rate and basis risk • Non-linear risk arises primarily from prepayment options embedded in mortgages and changes in the probability of newly originated mortgage commitments actually closing • Basis risk results from differences in the relative movements of the rate indices underlying mortgage exposure and other interest rates • Originates loans and takes deposits	• Mortgage pipeline loans, classified as derivatives • Warehouse loans, classified as trading assets – debt instruments • MSRs • Hedges of pipeline loans, warehouse loans and MSRs, classified as derivatives • Interest-only securities, classified as trading assets - debt instruments, and related hedges, classified as derivatives	• Retained loan portfolio • Deposits
CIB	• Makes markets and services clients across fixed income, foreign exchange, equities and commodities • Market risk arises from changes in market prices (e.g., rates and credit spreads) resulting in a potential decline in net income • Originates loans and takes deposits	• Trading assets/liabilities – debt and marketable equity instruments, and derivatives, including hedges of the retained loan portfolio • Certain securities purchased, loaned or sold under resale agreements and securities borrowed • Fair value option elected liabilities • Derivative CVA and associated hedges	• Retained loan portfolio • Deposits	• Private equity investments measured at fair value • Derivatives FVA and fair value option elected liabilities DVA
CB	• Engages in traditional wholesale banking activities which include extensions of loans and credit facilities and taking deposits • Risk arises from changes in interest rates and prepayment risk with potential for adverse impact on net interest income and interest-rate sensitive fees		• Retained loan portfolio • Deposits
AWM	• Provides initial capital investments in products such as mutual funds, which give rise to market risk arising from changes in market prices in such products • Originates loans and takes deposits	• Debt securities held in advance of distribution to clients, classified as trading assets - debt instruments	• Retained loan portfolio • Deposits	• Initial seed capital investments and related hedges, classified as derivatives • Capital invested alongside third-party investors, typically in privately distributed collective vehicles managed by AWM (i.e., co-investments)
Corporate	• Manages the Firm’s liquidity, funding, structural interest rate and foreign exchange risks arising from activities undertaken by the Firm’s four major reportable business segments	• Derivative positions measured at fair value through noninterest revenue in earnings • Marketable equity investments measured at fair value through noninterest revenue in earnings	• Deposits with banks • Investment securities portfolio and related interest rate hedges • Long-term debt and related interest rate hedges	• Private equity investments measured at fair value • Foreign exchange exposure related to Firm-issued non-USD long-term debt (“LTD”) and related hedges

JPMorgan Chase utilizes VaR, a statistical risk measure, to estimate the potential loss from adverse market moves in a normal market environment. The Firm has a single VaR framework used as a basis for calculating Risk Management VaR and Regulatory VaR.

The framework is employed across the Firm using historical simulation based on data for the previous 12 months. The framework’s approach assumes that historical changes in market values are representative of the distribution of potential outcomes in the immediate future. The Firm believes the use of Risk Management VaR provides a stable measure of VaR that is closely aligned to the day-to-day risk management decisions made by the lines of business, and provides the appropriate information needed to respond to risk events on a daily basis.

The Firm’s Risk Management VaR is calculated assuming a one-day holding period and an expected tail-loss methodology which approximates a 95% confidence level. Risk Management VaR provides a consistent framework to measure risk profiles and levels of diversification across product types and is used for aggregating risks and monitoring limits across businesses. VaR results are reported to senior management, the Board of Directors and regulators.

Under the Firm’s Risk Management VaR methodology, assuming current changes in market values are consistent with the historical changes used in the simulation, the Firm would expect to incur VaR “back-testing exceptions,” defined as losses greater than that predicted by VaR estimates, an average of five times every 100 trading days. The number of VaR back-testing exceptions observed can differ from the statistically expected number of back-testing exceptions if the current level of market volatility is materially different from the level of market volatility during the 12 months of historical data used in the VaR calculation.

Underlying the overall VaR model framework are individual VaR models that simulate historical market returns for individual products and/or risk factors. To capture material market risks as part of the Firm’s risk management framework, comprehensive VaR model calculations are performed daily for businesses whose activities give rise to market risk. These VaR models are granular and incorporate numerous risk factors and inputs to simulate daily changes in market values over the historical period; inputs are selected based on the risk profile of each portfolio, as sensitivities and historical time series used to generate daily market values may be different across product types or risk management systems. The VaR model results across all portfolios are aggregated at the Firm level.

As VaR is based on historical data, it is an imperfect measure of market risk exposure and potential losses, and it is not used to estimate the impact of stressed market conditions or to manage any impact from potential stress events. In addition, based on their reliance on available historical data, limited time horizons, and other factors, VaR measures are inherently limited in their ability to measure certain risks and to predict losses, particularly those associated with market illiquidity and sudden or severe shifts in market conditions.

For certain products, specific risk parameters are not captured in VaR due to the lack of inherent liquidity and availability of appropriate historical data. The Firm uses proxies to estimate the VaR for these and other products when daily time series are not available. It is likely that using an actual price-based time series for these products, if available, would affect the VaR results presented. The Firm therefore considers other measures such as stress testing and nonstatistical measures, in addition to VaR, to capture and manage its market risk positions.

The daily market data used in VaR models may be different than the independent third-party data collected for VCG price testing in its monthly valuation process. For example, in cases where market prices are not observable, or where proxies are used in VaR historical time series, the data sources may differ (see Valuation process in Note 2 for further information on the Firm’s valuation process). Because VaR model calculations require daily data and a consistent source for valuation, it may not be practical to use the data collected in the VCG monthly valuation process for VaR model calculations.

The Firm’s VaR model calculations are periodically evaluated and enhanced in response to changes in the composition of the Firm’s portfolios, changes in market conditions, improvements in the Firm’s modeling techniques and measurements, and other factors. Such changes may affect historical comparisons of VaR results. For information regarding model reviews and approvals, see Model Risk Management on page 137.

The Firm calculates separately a daily aggregated VaR in accordance with regulatory rules (“Regulatory VaR”), which is used to derive the Firm’s regulatory VaR-based capital requirements under Basel III. This Regulatory VaR model framework currently assumes a ten business-day holding period and an expected tail loss methodology which approximates a 99% confidence level. Regulatory VaR is applied to “covered” positions as defined by Basel III, which may be different than the positions included in the Firm’s Risk Management VaR. For example, credit derivative hedges of accrual loans are included in the Firm’s Risk Management VaR, while Regulatory VaR excludes these credit derivative hedges. In addition, in contrast to the Firm’s Risk Management VaR, Regulatory VaR currently excludes the diversification benefit for certain VaR models.

Average Total VaR decreased $16 million for the year-ended December 31, 2017 as compared with the prior year. The reduction is a result of refinements made to VaR models for certain asset-backed products, changes made to the scope of positions included in VaR in the third quarter of 2016, and lower volatility in the one-year historical look-back period.

In addition, Credit Portfolio VaR declined by $5 million reflecting the sale of select positions and lower volatility in the one-year historical look-back period.

In the first quarter of 2017, the Firm refined the historical proxy time series inputs to certain VaR models. These refinements are intended to more appropriately reflect the risk exposure from certain asset-backed products. In the absence of this refinement, the average Total VaR, CIB fixed income VaR, CIB trading VaR and CIB VaR would have each been higher by $4 million for the year ended December 31, 2017.

VaR can vary significantly as positions change, market volatility fluctuates, and diversification benefits change.

VaR back-testing

The Firm evaluates the effectiveness of its VaR methodology by back-testing, which compares the daily Risk Management VaR results with the daily gains and losses actually recognized on market-risk related revenue.

The Firm’s definition of market risk-related gains and losses is consistent with the definition used by the banking regulators under Basel III. Under this definition market risk-related gains and losses are defined as: gains and losses on the positions included in the Firm’s Risk Management VaR, excluding fees, commissions, certain valuation adjustments (e.g., liquidity and FVA), net interest income, and gains and losses arising from intraday trading.

Economic-value stress testing

Along with VaR, stress testing is an important tool in measuring and controlling risk. While VaR reflects the risk of loss due to adverse changes in markets using recent historical market behavior as an indicator of losses, stress testing is intended to capture the Firm’s exposure to unlikely but plausible events in abnormal markets. The Firm runs weekly stress tests on market-related risks across the lines of business using multiple scenarios that assume significant changes in risk factors such as credit spreads, equity prices, interest rates, currency rates and commodity prices.

The Firm uses a number of standard scenarios that capture different risk factors across asset classes including geographical factors, specific idiosyncratic factors and extreme tail events. The stress framework calculates multiple magnitudes of potential stress for both market rallies and market sell-offs for each risk factor and combines them in multiple ways to capture different market scenarios. For example, certain scenarios assess the potential loss arising from current exposures held by the Firm due to a broad sell-off in bond markets or an extreme widening in corporate credit spreads. The flexibility of the stress testing framework allows risk managers to construct new, specific scenarios that can be used to form decisions about future possible stress events.

Stress testing complements VaR by allowing risk managers

to shock current market prices to more extreme levels relative to those historically realized, and to stress test the relationships between market prices under extreme scenarios. Stress scenarios are defined and reviewed by Market Risk Management, and significant changes are reviewed by the relevant LOB Risk Committees and may be redefined on a periodic basis to reflect current market conditions.

Stress-test results, trends and qualitative explanations based on current market risk positions are reported to the respective LOBs and the Firm’s senior management to allow them to better understand the sensitivity of positions to certain defined events and to enable them to manage their risks with more transparency. Results are also reported to the Board of Directors.

The Firm’s stress testing framework is utilized in calculating results for the Firm’s CCAR and ICAAP processes. In addition, the results are incorporated into the quarterly assessment of the Firm’s Risk Appetite Framework and are also presented to the DRPC.

Nonstatistical risk measures

Nonstatistical risk measures include sensitivities to variables used to value positions, such as credit spread sensitivities, interest rate basis point values and market values. These measures provide granular information on the Firm’s market risk exposure. They are aggregated by line of business and by risk type, and are also used for monitoring internal market risk limits.

Loss advisories and profit and loss drawdowns

Loss advisories and profit and loss drawdowns are tools used to highlight trading losses above certain levels of risk tolerance. Profit and loss drawdowns are defined as the decline in net profit and loss since the year-to-date peak revenue level.

Earnings-at-risk

The VaR and sensitivity measures illustrate the economic sensitivity of the Firm’s Consolidated balance sheets to changes in market variables.

The effect of interest rate exposure on the Firm’s reported net income is also important as interest rate risk represents one of the Firm’s significant market risks. Interest rate risk arises not only from trading activities but also from the Firm’s traditional banking activities, which include extension of loans and credit facilities, taking deposits and issuing debt. The Firm evaluates its structural interest rate risk exposure through earnings-at-risk, which measures the extent to which changes in interest rates will affect the Firm’s net interest income and interest rate-sensitive fees. For a summary by line of business, identifying positions included in earnings-at-risk, see the table on page 122.

The CTC Risk Committee establishes the Firm’s structural interest rate risk policies and market risk limits, which are subject to approval by the DRPC. Treasury and CIO, working in partnership with the lines of business, calculates the Firm’s structural interest rate risk profile and reviews it with senior management including the CTC Risk Committee and the Firm’s ALCO. In addition, oversight of structural interest rate risk is managed through a dedicated risk function reporting to the CTC CRO. This risk function is responsible for providing independent oversight and governance around assumptions and establishing and monitoring limits for structural interest rate risk. The Firm manages structural interest rate risk generally through its investment securities portfolio and interest rate derivatives.

Structural interest rate risk can occur due to a variety of factors, including:


•	Differences in the timing among the maturity or repricing of assets, liabilities and off-balance sheet instruments


•	Differences in the amounts of assets, liabilities and off-balance sheet instruments that are repricing at the same time


•	Differences in the amounts by which short-term and long-term market interest rates change (for example, changes in the slope of the yield curve)


•	The impact of changes in the maturity of various assets, liabilities or off-balance sheet instruments as interest rates change

The Firm manages interest rate exposure related to its assets and liabilities on a consolidated, firmwide basis. Business units transfer their interest rate risk to Treasury and CIO through funds transfer pricing, which takes into account the elements of interest rate exposure that can be risk-managed in financial markets. These elements include asset and liability balances and contractual rates of interest, contractual principal payment schedules, expected prepayment experience, interest rate reset dates and maturities, rate indices used for repricing, and any interest rate ceilings or floors for adjustable rate products. All transfer-pricing assumptions are dynamically reviewed.

The Firm generates a baseline for net interest income and certain interest rate-sensitive fees, and then conducts simulations of changes for interest rate-sensitive assets and liabilities denominated in U.S. dollars and other currencies (“non-U.S. dollar” currencies). This simulation primarily includes, retained loans, deposits, deposits with banks, investment securities, long term debt and any related interest rate hedges, and excludes other positions in risk management VaR and other sensitivity-based measures as described on page 122.

Earnings-at-risk scenarios estimate the potential change in this baseline, over the following 12 months utilizing multiple assumptions. These scenarios consider the impact on exposures as a result of changes in interest rates from baseline rates, as well as pricing sensitivities of deposits, optionality and changes in product mix. The scenarios include forecasted balance sheet changes, as well as modeled prepayment and reinvestment behavior, but do not include assumptions about actions that could be taken by the Firm in response to any such instantaneous rate changes. Mortgage prepayment assumptions are based on scenario interest rates compared with underlying contractual rates, the time since origination, and other factors which are updated periodically based on historical experience. The pricing sensitivity of deposits in the baseline and scenarios use assumed rates paid which may differ from actual rates paid due to timing lags and other factors. The Firm’s earnings-at-risk scenarios are periodically evaluated and enhanced in response to changes in the composition of the Firm’s balance sheet, changes in market conditions, improvements in the Firm’s simulation and other factors.

The Firm’s U.S. dollar sensitivities are presented in the table below.

JPMorgan Chase’s 12-month earnings-at-risk sensitivity profiles

U.S. dollar

Instantaneous change in rates

(in billions)

+200 bps

+100 bps

-100 bps

-200 bps

December 31, 2017

2.4

1.7

(3.6

)

^(a)

^(b)

December 31, 2016

4.0

2.4

^(b)


(a)	As a result of the 2017 increase in the Fed Funds target rate to between 1.25% and 1.50%, the -100 bps sensitivity has been included.


(b)	Given the level of market interest rates, these downward parallel earnings-at-risk scenarios are not considered to be meaningful.

The non-U.S. dollar sensitivities for an instantaneous increase in rates by 200 and 100 basis points results in a 12-month benefit to net interest income of approximately $800 million and $500 million, respectively, at December 31, 2017 and were not material at December 31, 2016. The non-U.S. dollar sensitivities for an instantaneous decrease in rates by 200 and 100 basis points were not material to the Firm’s earnings-at-risk at December 31, 2017 and 2016.

The Firm’s sensitivity to rates is largely a result of assets repricing at a faster pace than deposits.

The Firm’s net U.S. dollar sensitivities for an instantaneous increase in rates by 200 and 100 basis points decreased by approximately $1.6 billion and $700 million, respectively, when compared to December 31, 2016. The primary driver of that decrease was the updating of the Firm’s baseline to reflect higher interest rates. As higher interest rates are reflected in the Firm’s baselines, the magnitude of the sensitivity to further increases in rates would be expected to be less significant.

Separately, another U.S. dollar interest rate scenario used by the Firm — involving a steeper yield curve with long-term rates rising by 100 basis points and short-term rates staying at current levels — results in a 12-month benefit to net interest income of approximately $700 million and $800 million at December 31, 2017 and 2016, respectively. The increase in net interest income under this scenario reflects the Firm reinvesting at the higher long-term rates, with funding costs remaining unchanged. The results of the comparable non-U.S. dollar scenarios were not material to the Firm at December 31, 2017 and 2016.



Gain/(loss) (in millions)
Activity	Description	Sensitivity measure	December 31, 2017				December 31, 2016

Investment activities
Investment management activities	Consists of seed capital and related hedges; and fund co-investments	10% decline in market value		$	(110	)	$	(166	)
Other investments	Consists of private equity and other investments held at fair value	10% decline in market value		(338		)	(358		)

Funding activities
Non-USD LTD cross-currency basis	Represents the basis risk on derivatives used to hedge the foreign exchange risk on the non-USD LTD	1 basis point parallel tightening of cross currency basis		(10		)	(7		)
Non-USD LTD hedges foreign currency (“FX”) exposure	Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges	10% depreciation of currency		(13		)	(23		)
Derivatives – funding spread risk	Impact of changes in the spread related to derivatives FVA	1 basis point parallel increase in spread		(6		)	(4		)
Fair value option elected liabilities – funding spread risk	Impact of changes in the spread related to fair value option elected liabilities DVA^(a)	1 basis point parallel increase in spread		22			17
Fair value option elected liabilities –interest rate sensitivity	Interest rate sensitivity on fair value option liabilities resulting from a change in the Firm’s own credit spread^(a)	1 basis point parallel increase in spread		(1		)	NA

The Firm has a country risk management framework for monitoring and assessing how financial, economic, political or other significant developments adversely affect the value of the Firm’s exposures related to a particular country or set of countries. The Country Risk Management group actively monitors the various portfolios which may be impacted by these developments to ensure the Firm’s exposures are diversified and that exposure levels are appropriate given the Firm’s strategy and risk tolerance relative to a country.

Organization and management

Country Risk Management is an independent risk management function that assesses, manages and monitors country risk originated across the Firm. The Firmwide Risk Executive for Country Risk reports to the Firm’s CRO.

The Firm’s country risk management function includes the following activities:


•	Establishing policies, procedures and standards consistent with a comprehensive country risk framework


•	Assigning sovereign ratings, and assessing country risks and establishing risk tolerance relative to a country


•	Measuring and monitoring country risk exposure and stress across the Firm


•	Managing and approving country limits and reporting trends and limit breaches to senior management


•	Developing surveillance tools, such as signaling models and ratings indicators, for early identification of potential country risk concerns


•	Providing country risk scenario analysis

Sources and measurement

The Firm is exposed to country risk through its lending and deposits, investing, and market-making activities, whether cross-border or locally funded. Country exposure includes activity with both government and private-sector entities in a country. Under the Firm’s internal country risk management approach, country exposure is reported based on the country where the majority of the assets of the obligor, counterparty, issuer or guarantor are located or where the majority of its revenue is derived, which may be different than the domicile (legal residence) or country of incorporation of the obligor, counterparty, issuer or guarantor. Country exposures are generally measured by considering the Firm’s risk to an immediate default of the counterparty or obligor, with zero recovery. Assumptions are sometimes required in determining the measurement and allocation of country exposure, particularly in the case of certain non-linear or index exposures. The use of different measurement approaches or assumptions could affect the amount of reported country exposure.

Under the Firm’s internal country risk measurement framework:


•	Lending exposures are measured at the total committed amount (funded and unfunded), net of the allowance for credit losses and cash and marketable securities collateral received


•	Deposits are measured as the cash balances placed with central and commercial banks


•	Securities financing exposures are measured at their receivable balance, net of collateral received


•	Debt and equity securities are measured at the fair value of all positions, including both long and short positions


•	Counterparty exposure on derivative receivables is measured at the derivative’s fair value, net of the fair value of the related collateral. Counterparty exposure on derivatives can change significantly because of market movements

•

Credit derivatives protection purchased and sold is reported based on the underlying reference entity and is measured at the notional amount of protection purchased or sold, net of the fair value of the recognized derivative receivable or payable. Credit derivatives protection purchased and sold in the Firm’s market-making activities is measured on a net basis, as such activities often result in selling and purchasing protection related to the same underlying reference entity; this reflects the manner in which the Firm manages these exposures

Some activities may create contingent or indirect exposure related to a country (for example, providing clearing services or secondary exposure to collateral on securities financing receivables). These exposures are managed in the normal course of business through the Firm’s credit, market, and operational risk governance, rather than through Country Risk Management.

The Firm’s internal country risk reporting differs from the reporting provided under the FFIEC bank regulatory requirements. For further information on the FFIEC’s reporting methodology, see Cross-border outstandings on page 296 of the 2017 Form 10-K.

Stress testing

Stress testing is an important component of the Firm’s country risk management framework, which aims to estimate and limit losses arising from a country crisis by measuring the impact of adverse asset price movements to a country based on market shocks combined with counterparty specific assumptions. Country Risk Management periodically designs and runs tailored stress scenarios to test vulnerabilities to individual countries, or groups of countries, in response to specific or potential market events, sector performance concerns and geopolitical risks. These tailored stress results are used to assess potential risk reduction across the Firm, as necessary.

Risk Reporting

To enable effective risk management of country risk to the Firm, country nominal exposure and stress are measured and reported weekly, and used by Country Risk Management to identify trends, and monitor high usages and breaches against limits.

The following table presents the Firm’s top 20 exposures by country (excluding the U.S.) as of December 31, 2017. The selection of countries represents the Firm’s largest total exposures by country, based on the Firm’s internal country risk management approach, and does not represent the Firm’s view of any actual or potentially adverse credit conditions. Country exposures may fluctuate from period to period due to client activity and market flows.



Top 20 country exposures (excluding the U.S.)^(a)
	December 31, 2017
(in billions)	Lending and deposits^(b)		Trading and investing^(c)(d)		Other^(e)		Total exposure
Germany	$	43.3	$	13.8	$	0.3	$	57.4
United Kingdom	32.0		11.5		2.8		46.3
Japan	24.7		5.7		0.4		30.8
France	12.5		6.6		0.3		19.4
China	9.6		5.5		1.2		16.3
Canada	12.2		2.5		0.2		14.9
Switzerland	8.5		1.5		3.9		13.9
India	5.3		6.1		0.9		12.3
Australia	5.8		5.6		—		11.4
Luxembourg	8.7		0.8		—		9.5
Netherlands	6.6		0.8		0.6		8.0
Spain	4.7		2.1		0.1		6.9
South Korea	4.6		1.9		0.3		6.8
Italy	3.5		3.1		0.1		6.7
Singapore	4.0		1.2		1.1		6.3
Mexico	4.0		1.2		—		5.2
Brazil	3.2		1.4		0.5		5.1
Hong Kong	2.3		0.9		1.6		4.8
Saudi Arabia	3.8		0.7		—		4.5
Belgium	2.7		1.5		—		4.2


(a)	Country exposures above reflect 86% of total firmwide non U.S. exposure.


(b)	Lending and deposits includes loans and accrued interest receivable (net of collateral and the allowance for loan losses), deposits with banks (including central banks), acceptances, other monetary assets, issued letters of credit net of participations, and unused commitments to extend credit. Excludes intra-day and operating exposures, such as from settlement and clearing activities.


(c)	Includes market-making inventory, AFS securities, counterparty exposure on derivative and securities financings net of collateral and hedging.


(d)	Includes single reference entity (“single-name”), index and other multiple reference entity transactions for which one or more of the underlying reference entities is in a country listed in the above table.


(e)	Includes capital invested in local entities and physical commodity inventory.

Operational risk is the risk associated with inadequate or failed internal processes, people and systems, or from external events; operational risk includes cybersecurity risk, business and technology resiliency risk, payment fraud risk, and third-party outsourcing risk. Operational risk is inherent in the Firm’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, inappropriate employee behavior, failure to comply with applicable laws and regulations or failure of vendors to perform in accordance with their arrangements. These events could result in financial losses, litigation and regulatory fines, as well as other damages to the Firm. The goal is to keep operational risk at appropriate levels in light of the Firm’s financial position, the characteristics of its businesses, and the markets and regulatory environments in which it operates.

Operational Risk Management Framework

To monitor and control operational risk, the Firm has an Operational Risk Management Framework (“ORMF”) which is designed to enable the Firm to maintain a sound and well-controlled operational environment. The ORMF has four main components: Governance, Risk Identification and Assessment, Measurement, and Monitoring and Reporting.

Governance

The lines of business and corporate functions are responsible for owning and managing their operational risks. The Firmwide Oversight and Control Group, which consists of control officers within each line of business and corporate function, is responsible for the day-to-day execution of the ORMF.

Line of business and corporate function control committees oversee the operational risk and control environments of their respective businesses and functions. These committees escalate operational risk issues to the FCC, as appropriate. For additional information on the FCC, see Enterprise-wide Risk Management on pages 75–137.

The Firmwide Risk Executive for Operational Risk Governance (“ORG”), a direct report to the CRO, is responsible for defining the ORMF and establishing minimum standards for its execution. Operational Risk Officers report to both the line of business CROs and to the Firmwide Risk Executive for ORG, and are independent of the respective businesses or corporate functions they oversee.

The Firm’s Operational Risk Governance Policy is approved by the DRPC. This policy establishes the Operational Risk Management Framework for the Firm.

Risk identification and assessment

The Firm utilizes several tools to identify, assess, mitigate and manage its operational risk. One such tool is the Risk and Control Self-Assessment (“RCSA”) program which is executed by LOBs and corporate functions in accordance with the minimum standards established by ORG. As part of the RCSA program, lines of business and corporate functions identify key operational risks inherent in their activities, evaluate the effectiveness of relevant controls in place to mitigate identified risks, and define actions to reduce residual risk. Action plans are developed for identified control issues and businesses and corporate functions are held accountable for tracking and resolving issues in a timely manner. Operational Risk Officers independently challenge the execution of the RCSA program and evaluate the appropriateness of the residual risk results.

In addition to the RCSA program, the Firm tracks and monitors events that have led to or could lead to actual operational risk losses, including litigation-related events. Responsible businesses and corporate functions analyze their losses to evaluate the effectiveness of their control environment to assess where controls have failed, and to determine where targeted remediation efforts may be required. ORG provides oversight of these activities and may also perform independent assessments of significant operational risk events and areas of concentrated or emerging risk.

Measurement

In addition to the level of actual operational risk losses, operational risk measurement includes operational risk-based capital and operational risk loss projections under both baseline and stressed conditions.

The primary component of the operational risk capital estimate is the Loss Distribution Approach (“LDA”) statistical model, which simulates the frequency and severity of future operational risk loss projections based on historical data. The LDA model is used to estimate an aggregate operational risk loss over a one-year time horizon, at a 99.9% confidence level. The LDA model incorporates actual internal operational risk losses in the quarter following the period in which those losses were realized, and the calculation generally continues to reflect such losses even after the issues or business activities giving rise to the losses have been remediated or reduced.

As required under the Basel III capital framework, the Firm’s operational risk-based capital methodology, which uses the Advanced Measurement Approach, incorporates internal and external losses as well as management’s view of tail risk captured through operational risk scenario analysis, and evaluation of key business environment and internal control metrics.

The Firm considers the impact of stressed economic conditions on operational risk losses and develops a forward looking view of material operational risk events that may occur in a stressed environment. The Firm’s operational risk stress testing framework is utilized in calculating results for the Firm’s CCAR and ICAAP processes.

For information related to operational risk RWA, CCAR or ICAAP, see Capital Risk Management section, pages 82–91.

Monitoring and reporting

ORG has established standards for consistent operational risk monitoring and reporting. The standards also reinforce escalation protocols to senior management and to the Board of Directors. Operational risk reports are produced on a firmwide basis as well as by line of business and corporate function.

Subcategories and examples of operational risks

As mentioned previously, operational risk can manifest itself in various ways. Operational risk subcategories such as Compliance risk, Conduct risk, Legal risk and Estimations and Model risk, as well as other operational risks, can lead to losses which are captured through the Firm’s operational risk measurement processes. More information on Compliance risk, Conduct risk, Legal risk and Estimations and Model risk subcategories are discussed on pages 134, 135, 136 and 137, respectively. Details on other select examples of operational risks are provided below.

Cybersecurity risk

Cybersecurity risk is an important, continuous and evolving focus for the Firm. The Firm devotes significant resources to protecting and continuing to improve the security of the Firm’s computer systems, software, networks and other technology assets. The Firm’s security efforts are intended to protect against, among other things, cybersecurity attacks by unauthorized parties to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. The Firm continues to make significant investments in enhancing its cyberdefense capabilities and to strengthen its partnerships with the appropriate government and law enforcement agencies and other businesses in order to understand the full spectrum of cybersecurity risks in the operating environment, enhance defenses and improve resiliency against cybersecurity threats. The Firm actively participates in discussions of cybersecurity risks with law enforcement, government officials, peer and industry groups, and has significantly increased efforts to educate employees and certain clients on the topic. Third parties with which the Firm does business or that facilitate the Firm’s business activities (e.g., vendors, exchanges, clearing houses, central depositories, and financial intermediaries) could also be sources of cybersecurity risk to the Firm. Third party cybersecurity incidents such as system breakdowns or failures, misconduct by the employees of such parties, or cyberattacks could affect their ability to deliver a product or service to the Firm or result in lost or compromised information of the Firm or its clients. Clients can also be

sources of cybersecurity risk to the Firm, particularly when their activities and systems are beyond the Firm’s own security and control systems. As a result, the Firm engages in regular and ongoing discussions with certain vendors and clients regarding cybersecurity risks and opportunities to improve security. However, where cybersecurity incidents are due to client failure to maintain the security of their own systems and processes, clients will generally be responsible for losses incurred.

To protect the confidentiality, integrity and availability of the Firm’s infrastructure, resources and information, the Firm leverages the ORMF to ensure risks are identified and managed within defined corporate tolerances. The Firm’s Board of Directors and the Audit Committee are regularly briefed on the Firm’s cybersecurity policies and practices and ongoing efforts to improve security, as well as its efforts regarding significant cybersecurity events.

Business and technology resiliency risk

Business disruptions can occur due to forces beyond the Firm’s control such as severe weather, power or telecommunications loss, flooding, transit strikes, terrorist threats or infectious disease. The safety of the Firm’s employees and customers is of the highest priority. The Firm’s global resiliency program is intended to enable the Firm to recover its critical business functions and supporting assets (i.e., staff, technology and facilities) in the event of a business interruption. The program includes corporate governance, awareness and training, as well as strategic and tactical initiatives to identify, assess, and manage business interruption and public safety risks.

The strength and proficiency of the Firm’s global resiliency program has played an integral role in maintaining the Firm’s business operations during and after various events.

Payment fraud risk

Payment fraud risk is the risk of external and internal parties unlawfully obtaining personal monetary benefit through misdirected or otherwise improper payment, and exposing the Firm to financial or reputational harm. Over the past year, the risk of payment fraud remained at a heightened level across the industry. The complexities of these attacks along with perpetrators’ strategies continue to evolve. A Payments Control Program has been established that includes Cybersecurity, Operations, Technology, Risk and the lines of business to manage the risk, implement controls and provide employee and client education and awareness training. In addition, a new wholesale fraud detection solution has been introduced which monitors high value payments for certain anomalies. The Firm’s monitoring of customer behavior is periodically evaluated and enhanced, and attempts to detect and mitigate new strategies implemented by fraud perpetrators. The Firm’s consumer and wholesale businesses collaborate closely to deploy risk mitigation controls across their businesses.

Compliance risk, a subcategory of operational risk, is the risk of failure to comply with applicable laws, rules and regulations.

Overview

Each line of business and function is accountable for managing its compliance risk. The Firm’s Compliance Organization (“Compliance”), which is independent of the lines of business, works closely with senior management to provide independent review, monitoring and oversight of business operations with a focus on compliance with the legal and regulatory obligations applicable to the delivery of the Firm’s products and services to clients and customers.

These compliance risks relate to a wide variety of legal and regulatory obligations, depending on the line of business and the jurisdiction, and include those related to financial products and services, relationships and interactions with clients and customers, and employee activities. For example, compliance risks include those associated with anti-money laundering compliance, trading activities, market conduct, and complying with the rules and regulations related to the offering of products and services across jurisdictional borders, among others. Compliance risk is also inherent in the Firm’s fiduciary activities, including the failure to exercise the applicable high standard of care (such as the duties of loyalty or care), to act in the best interest of clients and customers or to treat clients and customers fairly.

Other Functions provide oversight of significant regulatory obligations that are specific to their respective areas of responsibility.

Compliance implements various practices designed to identify and mitigate compliance risk by establishing policies, testing, monitoring, training and providing guidance.

Governance and oversight

Compliance is led by the Firms’ CCO who reports to the Firm’s CRO.

The Firm maintains oversight and coordination of its Compliance Risk Management practices through the Firm’s CCO, lines of business CCOs and regional CCOs to implement the Compliance program globally across the lines of business and regions. The Firm’s CCO is a member of the FCC and the FRC. The Firm’s CCO also provides regular updates to the Audit Committee and DRPC. In addition, certain Special Purpose Committees of the Board have been established to oversee the Firm’s compliance with regulatory Consent Orders.

The Firm has a Code of Conduct (the “Code”). Each employee is given annual training on the Code and is required annually to affirm his or her compliance with the Code. All new hires must complete Code training shortly after their start date with the Firm. The Code sets forth the Firm’s expectation that employees will conduct themselves with integrity at all times and provides the principles that govern employee conduct with clients, customers, shareholders and one another, as well as with the markets and communities in which the Firm does business. The Code requires employees to promptly report any known or suspected violation of the Code, any internal Firm policy, or any law or regulation applicable to the Firm’s business. It also requires employees to report any illegal conduct, or conduct that violates the underlying principles of the Code, by any of the Firm’s employees, customers, suppliers, contract workers, business partners, or agents. The Code prohibits retaliation against anyone who raises an issue or concern in good faith. Specified compliance officers are specially trained and designated as “code specialists” who act as a resource to employees on questions related to the Code. Employees can report any known or suspected violations of the Code through the Code Reporting Hotline by phone or the internet. The Hotline is anonymous, except in certain non-U.S. jurisdictions where laws prohibit anonymous reporting, and is available 24/7 globally, with translation services. It is maintained by an outside service provider. Annually, the Chief Compliance Office and Human Resources report to the Audit Committee on the Code of Conduct program and provide an update on the employee completion rate for Code of Conduct training and affirmation.

Conduct risk, a subcategory of operational risk, is the risk that any action or inaction by an employee of the Firm could lead to unfair client/customer outcomes, compromise the Firm’s reputation, impact the integrity of the markets in which the Firm operates, or reflect poorly on the Firm’s culture.

Overview

Each line of business or function is accountable for identifying and managing its conduct risk to provide appropriate engagement, ownership and sustainability of a culture consistent with the Firm’s How We Do Business Principles (“Principles”). The Principles serve as a guide for how employees are expected to conduct themselves. With the Principles serving as a guide, the Firm’s Code sets out the Firm’s expectations for each employee and provides information and resources to help employees conduct business ethically and in compliance with the law everywhere the Firm operates. For further discussion of the Code, see Compliance Risk Management on page 134.

Governance and oversight

The CMDC is the Board-level Committee with primary oversight of the firm’s Culture and Conduct Program. The Audit Committee is responsible for reviewing the program established by management to monitor compliance with the Code. Additionally, the DRPC reviews, at least annually, the Firm’s qualitative factors included in the Risk Appetite Framework, including conduct risk. The DRPC also meets annually with the CMDC to review and discuss aspects of the

Firm’s compensation practices. Finally, the Culture & Conduct Risk Committee provides oversight of certain culture and conduct risk initiatives at the Firm.

Conduct risk management is incorporated into various aspects of people management practices throughout the employee life cycle, including recruiting, onboarding, training and development, performance management, promotion and compensation processes. Businesses undertake annual RCSA assessments, and, as part of these reviews, identify their respective key inherent operational risks (including conduct risks), evaluate the design and effectiveness of their controls, identify control gaps and develop associated action plans. Each LOB and designated corporate function completes an assessment of conduct risk quarterly, reviews metrics and issues which may involve conduct risk, and provides business conduct training as appropriate.

The Firm’s Know Your Employee framework generally addresses how the Firm manages, oversees and responds to workforce conduct related matters that may otherwise expose the Firm to financial, reputational, compliance and other operating risks. The Firm also has a HR Control Forum, the primary purpose of which is to discuss conduct and accountability for more significant risk and control issues and review, when appropriate, employee actions including but not limited to promotion and compensation actions.

Legal risk, a subcategory of operational risk, is the risk of loss primarily caused by the actual or alleged failure to meet legal obligations that arise from the rule of law in jurisdictions in which the Firm operates, agreements with clients and customers, and products and services offered by the Firm.

Overview

The global Legal function (“Legal”) provides legal services and advice to the Firm. Legal is responsible for managing the Firm’s exposure to Legal risk by:


•	managing actual and potential litigation and enforcement matters, including internal reviews and investigations related to such matters


•	advising on products and services, including contract negotiation and documentation


•	advising on offering and marketing documents and new business initiatives


•	managing dispute resolution


•	interpreting existing laws, rules and regulations, and advising on changes thereto


•	advising on advocacy in connection with contemplated and proposed laws, rules and regulations, and


•	providing legal advice to the LOBs and corporate functions, in alignment with the lines of defense described under Enterprise-wide Risk Management.

Legal selects, engages and manages outside counsel for the Firm on all matters in which outside counsel is engaged. In addition, Legal advises the Firm’s Conflicts Office which reviews the Firm’s wholesale transactions that may have the potential to create conflicts of interest for the Firm.

Governance and oversight

The Firm’s General Counsel reports to the CEO and is a member of the Operating Committee, the Firmwide Risk Committee and the Firmwide Control Committee. The General Counsel’s leadership team includes a General Counsel for each line of business, the heads of the Litigation and Corporate & Regulatory practices, as well as the Firm’s Corporate Secretary. Each region (e.g., Latin America, Asia Pacific) has a General Counsel who is responsible for managing legal risk across all lines of business and functions in the region.

The Firm’s General Counsel and other members of Legal report on significant legal matters at each meeting of the Firm’s Board of Directors, at least quarterly to the Audit Committee, and periodically to the DRPC.

Legal serves on and advises various committees (including new business initiative and reputation risk committees) and advises the Firm’s businesses to protect the Firm’s reputation beyond any particular legal requirements.

Estimations and Model risk, a subcategory of operational risk, is the potential for adverse consequences from decisions based on incorrect or misused estimation outputs.

The Firm uses models and other analytical and judgment-based estimations across various businesses and functions. The estimation methods are of varying levels of sophistication and are used for many purposes, such as the valuation of positions and measurement of risk, assessing regulatory capital requirements, conducting stress testing, and making business decisions. A dedicated independent function, Model Risk Governance and Review (“MRGR”), defines and governs the Firm’s model risk management policies and certain analytical and judgment-based estimations, such as those used in risk management, budget forecasting and capital planning and analysis. MRGR reports to the Firm’s CRO.

Model risks are owned by the users of the models within the various businesses and functions in the Firm based on the specific purposes of such models. Users and developers of models are responsible for developing, implementing and testing their models, as well as referring models to the Model Risk function for review and approval. Once models have been approved, model users and developers are responsible for maintaining a robust operating environment, and must monitor and evaluate the performance of the models on an ongoing basis. Model users and developers may seek to enhance models in response to changes in the portfolios and in product and market developments, as well as to capture improvements in available modeling techniques and systems capabilities.

Models are tiered based on an internal standard according to their complexity, the exposure associated with the model and the Firm’s reliance on the model. This tiering is subject to the approval of the Model Risk function. A model review conducted by the Model Risk function considers the model’s suitability for the specific uses to which it will be put. The factors considered in reviewing a model include whether the model accurately reflects the characteristics of the product and its significant risks, the selection and reliability of model inputs, consistency with models for similar products, the appropriateness of any model-related adjustments, and sensitivity to input parameters and assumptions that cannot be observed from the market. When reviewing a model, the Model Risk function analyzes and challenges the model methodology and the reasonableness of model assumptions and may perform or require additional testing, including back-testing of model outcomes. Model reviews are approved by the appropriate level of management within the Model Risk function based on the relevant model tier.

Under the Firm’s Estimations and Model Risk Management Policy, the Model Risk function reviews and approves new models, as well as material changes to existing models, prior to implementation in the operating environment. In certain circumstances, the head of the Model Risk function may grant exceptions to the Firm’s policy to allow a model to be used prior to review or approval. The Model Risk function may also require the user to take appropriate actions to mitigate the model risk if it is to be used in the interim. These actions will depend on the model and may include, for example, limitation of trading activity.

The governance of analytical and judgment-based estimations, such as those used in risk management, budget forecasting, and capital planning and analysis, within MRGR’s scope, follows a consistent approach to the governance of models.

For a summary of valuations based on valuation models and other valuation techniques, see Critical Accounting Estimates Used by the Firm on pages 138–140 and Note 2.

JPMorgan Chase’s accounting policies and use of estimates are integral to understanding its reported results. The Firm’s most complex accounting estimates require management’s judgment to ascertain the appropriate carrying value of assets and liabilities. The Firm has established policies and control procedures intended to ensure that estimation methods, including any judgments made as part of such methods, are well-controlled, independently reviewed and applied consistently from period to period. The methods used and judgments made reflect, among other factors, the nature of the assets or liabilities and the related business and risk management strategies, which may vary across the Firm’s businesses and portfolios. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The Firm believes its estimates for determining the carrying value of its assets and liabilities are appropriate. The following is a brief description of the Firm’s critical accounting estimates involving significant judgments.

Allowance for credit losses

JPMorgan Chase’s allowance for credit losses covers the retained consumer and wholesale loan portfolios, as well as the Firm’s wholesale and certain consumer lending-related commitments. The allowance for loan losses is intended to adjust the carrying value of the Firm’s loan assets to reflect probable credit losses inherent in the loan portfolio as of the balance sheet date. Similarly, the allowance for lending-related commitments is established to cover probable credit losses inherent in the lending-related commitments portfolio as of the balance sheet date.

The allowance for credit losses includes a formula-based component, an asset-specific component, and a component related to PCI loans. The determination of each of these components involves significant judgment on a number of matters. For further discussion of these components, areas of judgment and methodologies used in establishing the Firm’s allowance for credit losses, see Note 13.

Allowance for credit losses sensitivity

The Firm’s allowance for credit losses is sensitive to numerous factors, which may differ depending on the portfolio. Changes in economic conditions or in the Firm’s assumptions and estimates could affect its estimate of probable credit losses inherent in the portfolio at the balance sheet date. The Firm uses its best judgment to assess these economic conditions and loss data in estimating the allowance for credit losses and these estimates are subject to periodic refinement based on changes to underlying external or Firm-specific historical data. The use of alternate estimates, data sources, adjustments to modeled loss estimates for model imprecision and other factors would result in a different estimated allowance for credit losses, as well as impact any related sensitivities described below. During the second quarter of 2017, the Firm refined its loss estimates relating to the wholesale credit portfolio. See Note 13 for further discussion.

To illustrate the potential magnitude of certain alternate judgments, the Firm estimates that changes in the following inputs would have the following effects on the Firm’s modeled credit loss estimates as of December 31, 2017, without consideration of any offsetting or correlated effects of other inputs in the Firm’s allowance for loan losses:


•	A combined 5% decline in housing prices and a 100 basis point increase in unemployment rates from current levels could imply:


◦	an increase to modeled credit loss estimates of approximately $525 million for PCI loans.


◦	an increase to modeled annual credit loss estimates of approximately $100 million for residential real estate, excluding PCI loans.


•	For credit card loans, a 100 basis point increase in unemployment rates from current levels could imply an increase to modeled annual loss estimates of approximately $1.0 billion.


•	An increase in PD factors consistent with a one-notch downgrade in the Firm’s internal risk ratings for its entire wholesale loan portfolio could imply an increase in the Firm’s modeled credit loss estimates of approximately $1.4 billion.


•	A 100 basis point increase in estimated loss given default (“LGD”) for the Firm’s entire wholesale loan portfolio could imply an increase in the Firm’s modeled credit loss estimates of approximately $175 million.

The purpose of these sensitivity analyses is to provide an indication of the isolated impacts of hypothetical alternative assumptions on modeled loss estimates. The changes in the inputs presented above are not intended to imply management’s expectation of future deterioration of those risk factors. In addition, these analyses are not intended to estimate changes in the overall allowance for loan losses, which would also be influenced by the judgment management applies to the modeled loss estimates to reflect the uncertainty and imprecision of these modeled loss estimates based on then-current circumstances and conditions.

It is difficult to estimate how potential changes in specific factors might affect the overall allowance for credit losses because management considers a variety of factors and inputs in estimating the allowance for credit losses. Changes in these factors and inputs may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors may be directionally inconsistent, such that improvement in one factor may offset deterioration in other factors. In addition, it is difficult to predict how changes in specific economic conditions or assumptions could affect borrower behavior or other factors considered by management in estimating the allowance for credit losses. Given the process the Firm follows and the judgments made in evaluating the risk factors related to its loss estimates, management believes that its current estimate of the allowance for credit losses is appropriate.

Fair value of financial instruments, MSRs and commodities inventory

JPMorgan Chase carries a portion of its assets and liabilities at fair value. The majority of such assets and liabilities are measured at fair value on a recurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis, including certain mortgage, home equity and other loans, where the carrying value is based on the fair value of the underlying collateral.

Assets measured at fair value

The following table includes the Firm’s assets measured at fair value and the portion of such assets that are classified within level 3 of the valuation hierarchy. For further information, see Note 2.



December 31, 2017 (in billions, except ratio data)	Total assets at fair value		Total level 3 assets
Trading debt and equity instruments	$	325.3	$	5.4
Derivative receivables^(a)	56.5		6.0
Trading assets	381.8		11.4
AFS securities	202.2		0.3
Loans	2.5		0.3
MSRs	6.0		6.0
Other	33.2		1.2
Total assets measured at fair value on a recurring basis	625.7		19.2
Total assets measured at fair value on a nonrecurring basis	1.3		0.8
Total assets measured at fair value	$	627.0	$	20.0
Total Firm assets	$	2,533.6
Level 3 assets as a percentage of total Firm assets^(a)			0.8		%
Level 3 assets as a percentage of total Firm assets at fair value^(a)			3.2		%

(a)

For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $6.0 billion of derivative receivables classified as level 3 does not reflect the netting adjustment as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral.

Valuation

Details of the Firm’s processes for determining fair value are set out in Note 2. Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the valuation hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2.

In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation technique to use. Second, the lack of observability of certain significant inputs requires management to assess all relevant empirical data in deriving valuation inputs including, for example, transaction details, yield curves, interest rates, prepayment rates, default rates, volatilities, correlations, equity or debt prices,

valuations of comparable instruments, foreign exchange rates and credit curves. For further discussion of the valuation of level 3 instruments, including unobservable inputs used, see Note 2.

For instruments classified in levels 2 and 3, management judgment must be applied to assess the appropriate level of valuation adjustments to reflect counterparty credit quality, the Firm’s creditworthiness, market funding rates, liquidity considerations, unobservable parameters, and for portfolios that meet specified criteria, the size of the net open risk position. The judgments made are typically affected by the type of product and its specific contractual terms, and the level of liquidity for the product or within the market as a whole. For further discussion of valuation adjustments applied by the Firm see Note 2.

Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios.

The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. For a detailed discussion of the Firm’s valuation process and hierarchy, and its determination of fair value for individual financial instruments, see Note 2.

Goodwill impairment

Under U.S. GAAP, goodwill must be allocated to reporting units and tested for impairment at least annually. The Firm’s process and methodology used to conduct goodwill impairment testing is described in Note 15.

Management applies significant judgment when estimating the fair value of its reporting units. Estimates of fair value are dependent upon estimates of the future earnings potential of the Firm’s reporting units, long-term growth rates and the estimated market cost of equity. Imprecision in estimating these factors can affect the estimated fair value of the reporting units.

Based upon the updated valuations for all of its reporting units, the Firm concluded that the goodwill allocated to its reporting units was not impaired at December 31, 2017. The fair values of these reporting units exceeded their carrying values by approximately 15% or higher and did not indicate a significant risk of goodwill impairment based on current projections and valuations. Such valuations do not reflect the impact of the TCJA that was enacted in December 2017 as such impact would not alter the conclusion that goodwill is not impaired.

The projections for all of the Firm’s reporting units are consistent with management’s current short-term business outlook assumptions, and in the longer term, incorporate a set of macroeconomic assumptions and the Firm’s best estimates of long-term growth and returns on equity of its

businesses. Where possible, the Firm uses third-party and peer data to benchmark its assumptions and estimates.

Declines in business performance, increases in credit losses, increases in capital requirements, as well as deterioration in economic or market conditions, adverse estimates of regulatory or legislative changes or increases in the estimated market cost of equity, could cause the estimated fair values of the Firm’s reporting units or their associated goodwill to decline in the future, which could result in a material impairment charge to earnings in a future period related to some portion of the associated goodwill.

For additional information on goodwill, see Note 15.

Credit card rewards liability

JPMorgan Chase offers credit cards with various reward programs which allow cardholders to earn reward points based on their account activity and the terms and conditions of the rewards program. Generally, there are no limits on the points that an eligible cardholder can earn, nor do they expire, and these points can be redeemed for a variety of rewards, including cash (predominantly in the form of account credits), gift cards and travel.

The Firm maintains a rewards liability which represents the estimated cost of reward points earned and expected to be redeemed by cardholders. The rewards liability is sensitive to various assumptions, including cost per point and redemption rates for each of the various reward programs, which are evaluated periodically. The liability is accrued as the cardholder earns the benefit and is reduced when the cardholder redeems points. This liability was $4.9 billion and $3.8 billion at December 31, 2017 and 2016, respectively, and is recorded in accounts payable and other liabilities on the Consolidated balance sheets.

Income taxes

JPMorgan Chase is subject to the income tax laws of the various jurisdictions in which it operates, including U.S. federal, state and local, and non-U.S. jurisdictions. These laws are often complex and may be subject to different interpretations. To determine the financial statement impact of accounting for income taxes, including the provision for income tax expense and unrecognized tax benefits, JPMorgan Chase must make assumptions and judgments about how to interpret and apply these complex tax laws to numerous transactions and business events, as well as make judgments regarding the timing of when certain items may affect taxable income in the U.S. and non-U.S. tax jurisdictions.

JPMorgan Chase’s interpretations of tax laws around the world are subject to review and examination by the various taxing authorities in the jurisdictions where the Firm operates, and disputes may occur regarding its view on a tax position. These disputes over interpretations with the various taxing authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Firm operates. JPMorgan Chase regularly reviews whether it may be assessed additional income taxes as a result of the resolution of these matters, and the Firm records additional reserves as appropriate. In addition, the Firm may revise its estimate of income taxes due to changes in income tax

laws, legal interpretations, and business strategies. It is possible that revisions in the Firm’s estimate of income taxes may materially affect the Firm’s results of operations in any reporting period.

The Firm’s provision for income taxes is composed of current and deferred taxes. Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. The Firm has also recognized deferred tax assets in connection with certain tax attributes, including NOLs. The Firm performs regular reviews to ascertain whether its deferred tax assets are realizable. These reviews include management’s estimates and assumptions regarding future taxable income, which also incorporates various tax planning strategies, including strategies that may be available to utilize NOLs before they expire. In connection with these reviews, if it is determined that a deferred tax asset is not realizable, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if the Firm determines that, based on revised estimates of future taxable income or changes in tax planning strategies, it is more likely than not that all or part of the deferred tax asset will become realizable. As of December 31, 2017, management has determined it is more likely than not that the Firm will realize its deferred tax assets, net of the existing valuation allowance.

Prior to December 31, 2017, U.S. federal income taxes had not been provided on the undistributed earnings of certain non-U.S. subsidiaries, to the extent that such earnings had been reinvested abroad for an indefinite period of time. The Firm will no longer maintain the indefinite reinvestment assertion on the undistributed earnings of those non-U.S. subsidiaries in light of the enactment of the TCJA. The U.S. federal and state and local income taxes associated with the undistributed and previously untaxed earnings of those non-U.S. subsidiaries was included in the deemed repatriation charge recorded as of December 31, 2017.

The Firm adjusts its unrecognized tax benefits as necessary when additional information becomes available. Uncertain tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the largest amount of benefit that management believes is more likely than not to be realized upon settlement. It is possible that the reassessment of JPMorgan Chase’s unrecognized tax benefits may have a material impact on its effective income tax rate in the period in which the reassessment occurs.

The income tax expense for the current year includes a reasonable estimate recorded under SEC Staff Accounting Bulletin No. 118 resulting from the enactment of the TCJA.

For additional information on income taxes, see Note 24.

Litigation reserves

For a description of the significant estimates and judgments associated with establishing litigation reserves, see

Note 29.



ACCOUNTING AND REPORTING DEVELOPMENTS



SEC Staff Accounting Bulletin adopted during 2017

Bulletin	Summary of guidance	Effects on financial statements
Application of U.S. GAAP related to the Tax Cuts and Jobs Act (“TCJA”) (SEC Staff Accounting Bulletin No. 118) Issued December 2017	• Provides guidance on the accounting for income taxes in the context of the TCJA. • For impacts of the tax law changes that are reasonably estimable, requires the recognition of provisional amounts in year-end 2017 financial statements. • Provides a 1-year measurement period in which to refine previously recorded provisional amounts based on new information or interpretations.	• The TCJA resulted in a $2.4 billion decrease in net income 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. Certain of these amounts may be refined in accordance with SEC Staff Accounting Bulletin No. 118. • Refer to Note 24 for additional information related to the impacts of the TCJA.

FASB Standards issued but not adopted as of December 31, 2017

Standard	Summary of guidance	Effects on financial statements
Revenue recognition – revenue from contracts with customers Issued May 2014	• Requires that revenue from contracts with customers be recognized upon transfer of control of a good or service in the amount of consideration expected to be received. • Changes the accounting for certain contract costs, including whether they may be offset against revenue in the Consolidated statements of income, and requires additional disclosures about revenue and contract costs. • May be adopted using a full retrospective approach or a modified, cumulative effect approach wherein the guidance is applied only to existing contracts as of the date of initial application, and to new contracts transacted after that date.	• Adopted January 1, 2018. • The Firm adopted the revenue recognition guidance using the full retrospective method of adoption. • The adoption of the guidance did not result in any material changes in the timing of the Firm’s revenue recognition, but will require gross presentation of certain costs currently offset against revenue. This change in presentation will be reflected in the first quarter of 2018 and will increase both noninterest revenue and noninterest expense for the Firm by $1.1 billion and $900 million for the years ended December 31, 2017 and 2016, respectively. The increase is predominantly associated with certain distribution costs in AWM (currently offset against Asset management, administration and commissions), with the remainder of the increase associated with certain underwriting costs in CIB (currently offset against Investment banking fees). • The Firm’s Note 6 qualitative disclosures are consistent with the guidance.
Recognition and measurement of financial assets and financial liabilities Issued January 2016	• Requires that certain equity instruments be measured at fair value, with changes in fair value recognized in earnings. • Provides a measurement alternative for equity securities without readily determinable fair values to be measured at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer. Any such price changes will be reflected in earnings beginning in the period of adoption. • Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption, except for those equity securities that are eligible for the measurement alternative.	• The Firm early adopted the provisions of this guidance related to presenting DVA in OCI for financial liabilities where the fair value option has been elected, effective January 1, 2016. The Firm adopted the portions of the guidance that were not eligible for early adoption on January 1, 2018. • Upon adoption, the Firm elected the measurement alternative for its equity securities that do not have readily determinable fair values, and the Firm did not record a cumulative-effect adjustment related to the adoption of this guidance.



FASB Standards issued but not adopted as of December 31, 2017 (continued)

Standard	Summary of guidance	Effects on financial statements
Classification of certain cash receipts and cash payments in the statement of cash flows Issued August 2016	• Provides targeted amendments to the classification of certain cash flows, including treatment of cash payments for settlement of zero-coupon debt instruments and distributions received from equity method investments. • Requires retrospective application to all periods presented.	• Adopted January 1, 2018. • No material impact upon adoption as the Firm was either in compliance with the amendments or the amounts to which it is applied are immaterial.
Treatment of restricted cash on the statement of cash flows Issued November 2016	• Requires inclusion of restricted cash in the cash and cash equivalents balances in the Consolidated statements of cash flows. • Requires additional disclosures to supplement the Consolidated statements of cash flows. • Requires retrospective application to all periods presented.	• Adopted January 1, 2018. • The adoption of the guidance will result in reclassification of restricted cash balances into Cash and restricted cash on the Consolidated statements of cash flows in the first quarter of 2018. The Firm will include Cash and due from banks and Deposits with banks in Cash and restricted cash in the Consolidated statements of cash flows, resulting in Deposits with banks no longer being reflected in Investing activities. • In addition, to align with the presentation of Cash and restricted cash on the Consolidated statements of cash flows, the Firm will reclassify restricted cash balances to Cash and due from banks and to Deposits with banks from Other assets and disclose the total for Cash and restricted cash on the Firm’s Consolidated balance sheets in the first quarter of 2018.
Definition of a business Issued January 2017	• Narrows the definition of a business and clarifies that, to be considered a business, the fair value of the gross assets acquired (or disposed of) may not be substantially all concentrated in a single identifiable asset or a group of similar assets. • In addition, in order to be considered a business, a set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.	• Adopted January 1, 2018. • No impact upon adoption because the guidance is to be applied prospectively. Subsequent to adoption, fewer transactions will be treated as acquisitions or dispositions of a business.
Presentation of net periodic pension cost and net periodic postretirement benefit cost Issued March 2017	• Requires the service cost component of net periodic pension and postretirement benefit cost to be reported separately in the consolidated results of operations from the other components (e.g., expected return on assets, interest costs, amortization of gains/losses and prior service costs). • Requires retrospective application and presentation in the consolidated results of operations of the service cost component in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component.	• Adopted January 1, 2018. • The adoption of the guidance in the first quarter of 2018 will result in an increase in compensation expense and a reduction in other expense of $223 million and $250 million for the years ended December 31, 2017 and 2016, respectively.
Premium amortization on purchased callable debt securities Issued March 2017	• Requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, noncontingent and callable at fixed prices and on preset dates. • Does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. • Requires adoption on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.	• The Firm early adopted the new guidance on January 1, 2018. • The new guidance primarily impacts obligations of U.S. states and municipalities held in the Firm’s investment securities portfolio. • The adoption of this guidance resulted in a cumulative-effect adjustment that reduced retained earnings by approximately $505 million as of January 1, 2018, with a corresponding increase of $261 million (after tax) in AOCI and related adjustments to securities and tax liabilities. • Subsequent to adoption, although the guidance will reduce the interest income recognized prior to the earliest call date for callable debt securities held at a premium, the effect of this guidance on the Firm’s net interest income is not expected to be material.



FASB Standards issued but not adopted as of December 31, 2017 (continued)

Standard	Summary of guidance	Effects on financial statements
Hedge accounting Issued August 2017	• Reduces earnings volatility by better aligning the accounting with the economics of the risk management activities. • Expands the ability for certain hedges of interest rate risk to qualify for hedge accounting. • Allows recognition of ineffectiveness in cash flow hedges and net investment hedges in OCI. • Allows a one-time election at adoption to transfer certain securities classified as held-to-maturity to available-for-sale. • Simplifies hedge documentation requirements.	• The Firm early adopted the new guidance on January 1, 2018. • The adoption of the guidance resulted in a cumulative-effect adjustment that increased retained earnings in the amount of $34 million, with related adjustments to debt carrying values and AOCI. • The Firm will also amend its qualitative and quantitative disclosures within its derivative instruments note to the Consolidated Financial Statements in the first quarter of 2018. • In accordance with the new guidance, the Firm elected to transfer certain securities from HTM to AFS. The amendments provide the Firm with additional hedge accounting alternatives for its AFS securities (including those transferred under the election) to be considered as the Firm manages it structural interest rate risk and regulatory capital. The Firm is currently evaluating those risk management alternatives and intends to manage the transferred securities in a manner consistent with its existing AFS securities. This transfer is a non-cash transaction at fair value.
Reclassification of Certain Tax Effects from AOCI Issued February 2018	• Provides an election to reclassify from AOCI to retained earnings stranded tax effects due to the revaluation of deferred tax assets and liabilities as a result of changes in applicable tax rates under the TCJA. • Requires additional disclosures related to the Firm’s election to reclassify amounts from AOCI to retained earnings and the Firm’s policy for releasing income tax effects from AOCI. • The guidance may be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.	• The Firm early adopted the new guidance on January 1, 2018. • The adoption of the guidance resulted in a cumulative-effect adjustment that increased retained earnings in the amount of $288 million in the first quarter of 2018. This amount is an estimate that may be refined in accordance with SEC Staff Accounting Bulletin No. 118, and represents the removal of the stranded tax effects from AOCI, thereby allowing the tax effects within AOCI to reflect the new respective corporate income tax rates. • Refer to Note 24 for additional information related to the impacts of the TCJA.
Leases Issued February 2016	• Requires lessees to recognize all leases longer than twelve months on the Consolidated balance sheets as lease liabilities with corresponding right-of-use assets. • Requires lessees and lessors to classify most leases using principles similar to existing lease accounting, but eliminates the “bright line” classification tests. • Permits the Firm to generally account for its existing leases consistent with current guidance, except for the incremental balance sheet recognition. • Expands qualitative and quantitative disclosures regarding leasing arrangements. • May be adopted using a modified cumulative effect approach wherein the guidance is applied only to existing contracts as of the date of initial application, and to new contracts transacted after that date.	• Required effective date: January 1, 2019.^(a) • The Firm is in the process of its implementation which has included an initial evaluation of its leasing contracts and activities. As a lessee, the Firm is developing its methodology to estimate the right-of-use assets and lease liabilities, which is based on the present value of lease payments. The Firm expects to recognize lease liabilities and corresponding right-of-use assets (at their present value) related to predominantly all of the $10 billion of future minimum payments required under operating leases as disclosed in Note 28. However, the population of contracts subject to balance sheet recognition and their initial measurement remains under evaluation. The Firm does not expect material changes to the recognition of operating lease expense in its Consolidated statements of income. • The Firm plans to adopt the new guidance in the first quarter of 2019.



FASB Standards issued but not adopted as of December 31, 2017 (continued)

Standard	Summary of guidance	Effects on financial statements
Financial instruments – credit losses Issued June 2016	• Replaces existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost (including HTM securities), which will reflect management’s estimate of credit losses over the full remaining expected life of the financial assets. • Eliminates existing guidance for PCI loans, and requires recognition of an allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination. • Amends existing impairment guidance for AFS securities to incorporate an allowance, which will allow for reversals of impairment losses in the event that the credit of an issuer improves. • Requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.	• Required effective date: January 1, 2020.^(a) • The Firm has begun its implementation efforts by establishing a Firmwide, cross-discipline governance structure. The Firm is currently identifying key interpretive issues, and is assessing existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. • The Firm expects that the new guidance will result in an increase in its allowance for credit losses due to several factors, including: 1. The allowance related to the Firm’s loans and commitments will increase to cover credit losses over the full remaining expected life of the portfolio, and will consider expected future changes in macroeconomic conditions 2. The nonaccretable difference on PCI loans will be recognized as an allowance, offset by an increase in the carrying value of the related loans 3. An allowance will be established for estimated credit losses on HTM securities • The extent of the increase is under evaluation, but will depend upon the nature and characteristics of the Firm’s portfolio at the adoption date, and the macroeconomic conditions and forecasts at that date.
Goodwill Issued January 2017	• Requires an impairment loss to be recognized when the estimated fair value of a reporting unit falls below its carrying value. • Eliminates the second condition in the current guidance that requires an impairment loss to be recognized only if the estimated implied fair value of the goodwill is below its carrying value.	• Required effective date: January 1, 2020.^(a) • Based on current impairment test results, the Firm does not expect a material effect on the Consolidated Financial Statements. • After adoption, the guidance may result in more frequent goodwill impairment losses due to the removal of the second condition. • The Firm is evaluating the timing of adoption.

From time to time, the Firm has made and will make forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” or other words of similar meaning. Forward-looking statements provide JPMorgan Chase’s current expectations or forecasts of future events, circumstances, results or aspirations. JPMorgan Chase’s disclosures in this Annual Report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Firm also may make forward-looking statements in its other documents filed or furnished with the SEC. In addition, the Firm’s senior management may make forward-looking statements orally to investors, analysts, representatives of the media and others.

All forward-looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond the Firm’s control. JPMorgan Chase’s actual future results may differ materially from those set forth in its forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ from those in the forward-looking statements:


•	Local, regional and global business, economic and political conditions and geopolitical events;


•	Changes in laws and regulatory requirements, including capital and liquidity requirements affecting the Firm’s businesses, and the ability of the Firm to address those requirements;


•	Heightened regulatory and governmental oversight and scrutiny of JPMorgan Chase’s business practices, including dealings with retail customers;


•	Changes in trade, monetary and fiscal policies and laws;


•	Changes in income tax laws and regulations;


•	Securities and capital markets behavior, including changes in market liquidity and volatility;


•	Changes in investor sentiment or consumer spending or savings behavior;


•	Ability of the Firm to manage effectively its capital and liquidity, including approval of its capital plans by banking regulators;


•	Changes in credit ratings assigned to the Firm or its subsidiaries;


•	Damage to the Firm’s reputation;


•	Ability of the Firm to deal effectively with an economic slowdown or other economic or market disruption;


•	Technology changes instituted by the Firm, its counterparties or competitors;


•	The success of the Firm’s business simplification initiatives and the effectiveness of its control agenda;


•	Ability of the Firm to develop new products and services, and the extent to which products or services previously sold by the Firm (including but not limited to mortgages and asset-backed securities) require the Firm to incur liabilities or absorb losses not contemplated at their initiation or origination;


•	Acceptance of the Firm’s new and existing products and services by the marketplace and the ability of the Firm to innovate and to increase market share;


•	Ability of the Firm to attract and retain qualified employees;


•	Ability of the Firm to control expenses;


•	Competitive pressures;


•	Changes in the credit quality of the Firm’s customers and counterparties;


•	Adequacy of the Firm’s risk management framework, disclosure controls and procedures and internal control over financial reporting;


•	Adverse judicial or regulatory proceedings;


•	Changes in applicable accounting policies, including the introduction of new accounting standards;


•	Ability of the Firm to determine accurate values of certain assets and liabilities;


•	Occurrence of natural or man-made disasters or calamities or conflicts and the Firm’s ability to deal effectively with disruptions caused by the foregoing;


•	Ability of the Firm to maintain the security of its financial, accounting, technology, data processing and other operational systems and facilities;


•	Ability of the Firm to withstand disruptions that may be caused by any failure of its operational systems or those of third parties;


•	Ability of the Firm to effectively defend itself against cyberattacks and other attempts by unauthorized parties to access information of the Firm or its customers or to disrupt the Firm’s systems; and


•	The other risks and uncertainties detailed in Part I, Item 1A: Risk Factors in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2017.

Any forward-looking statements made by or on behalf of the Firm speak only as of the date they are made, and JPMorgan Chase does not undertake to update forward-looking statements. The reader should, however, consult any further disclosures of a forward-looking nature the Firm may make in any subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, or Current Reports on Form 8-K.

Management of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Firm’s principal executive and principal financial officers, or persons performing similar functions, and effected by JPMorgan Chase’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

JPMorgan Chase’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Firm’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Firm are being made only in accordance with authorizations of JPMorgan Chase’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Firm’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has completed an assessment of the effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017. In making the assessment, management used the “Internal Control — Integrated Framework” (“COSO 2013”) promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based upon the assessment performed, management concluded that as of December 31, 2017, JPMorgan Chase’s internal control over financial reporting was effective based upon the COSO 2013 framework. Additionally, based upon management’s assessment, the Firm determined that there were no material weaknesses in its internal control over financial reporting as of December 31, 2017.

The effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

James Dimon

Chairman and Chief Executive Officer

Marianne Lake

Executive Vice President and Chief Financial Officer

February 27, 2018

To the Board of Directors and Stockholders of JPMorgan Chase & Co.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of JPMorgan Chase & Co. and its subsidiaries (the “Firm”) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Firm’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Firm as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Firm maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Firm’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express opinions on the Firm’s consolidated financial statements and on the Firm’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

February 27, 2018

We have served as the Firm’s auditor since 1965.

PricewaterhouseCoopers LLP Ÿ 300 Madison Avenue Ÿ New York, NY 10017



For the fiscal year ended		Commission file
December 31, 2017		number 1-5805



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)



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



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)



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



Part I		Page
Item 1.	Business.	1
	Overview	1
	Business segments	1
	Competition	1
	Supervision and regulation	1
	Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials	278
	Return on equity and assets	38, 277, 278
	Securities portfolio	290
	Loan portfolio	99–116, 211–230, 291–296
	Summary of loan and lending-related commitments loss experience	117–119, 231–235, 297–298
	Deposits	248,299
	Short-term and other borrowed funds	300
Item 1A.	Risk Factors.	8–26
Item 1B.	Unresolved Staff Comments.	26
Item 2.	Properties.	27
Item 3.	Legal Proceedings.	27
Item 4.	Mine Safety Disclosures.	27

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	28
Item 6.	Selected Financial Data.	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	28
Item 8.	Financial Statements and Supplementary Data.	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	29
Item 9A.	Controls and Procedures.	29
Item 9B.	Other Information.	29

Part III
Item 10.	Directors, Executive Officers and Corporate Governance.	30
Item 11.	Executive Compensation.	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	31
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	31
Item 14.	Principal Accounting Fees and Services.	31

Part IV
Item 15.	Exhibits, Financial Statement Schedules.	32-35


(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.


(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.


(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.



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		Restated Certificate of Incorporation of JPMorgan Chase & Co., effective April 5, 2006 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 7, 2006).

3.2		Amendment to the Restated Certificate of Incorporation of JPMorgan Chase & Co., effective June 7, 2013 (incorporated by reference to Appendix F to the Proxy Statement on Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 10, 2013).

3.3		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 24, 2008).


3.4		Certificate of Designations for 5.45% Non-Cumulative Preferred Stock, Series P (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed February 5, 2013).

3.5		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Q (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 23, 2013).

3.6		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series R (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed July 29, 2013).

3.7		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 22, 2014).



3.8		Certificate of Designations for 6.70% Non-Cumulative Preferred Stock, Series T (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 30, 2014).

3.9		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series U (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on March 10, 2014).

3.10		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series V (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on June 9, 2014).

3.11		Certificate of Designations for 6.30% Non-Cumulative Preferred Stock, Series W (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on June 23, 2014).

3.12		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series X (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on September 23, 2014).
3.13		Certificate of Designations for 6.125% Non-Cumulative Preferred Stock, Series Y (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed February 17, 2015).

3.14		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Z (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 21, 2015).

3.15		Certificate of Designations for 6.10% Non-Cumulative Preferred Stock, Series AA (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed June 4, 2015).

3.16		Certificate of Designations for 6.15% Non-Cumulative Preferred Stock, Series BB (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed July 29, 2015).

3.17		Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series CC (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed October 20, 2017).



3.18		By-laws of JPMorgan Chase & Co., as amended, effective January 30, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 30, 2018).
4.1(a)		Indenture, dated as of October 21, 2010, between JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No.1-5805) filed October 21, 2010).

4.1(b)		First Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee, to the Indenture, dated as of October 21, 2010 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).

4.2(a)		Subordinated Indenture, dated as of March 14, 2014, between JPMorgan Chase & Co. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No.1-5805) filed March 14, 2014).

4.2(b)		First Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and U.S. Bank Trust National Association, as Trustee, to the Subordinated Indenture, dated as of March 14, 2014 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).

4.3(a)		Indenture, dated as of May 25, 2001, between JPMorgan Chase & Co. and Bankers Trust Company (succeeded by Deutsche Bank Trust Company Americas), as Trustee (incorporated by reference to Exhibit 4(a)(1) to the Registration Statement on Form S-3 of JPMorgan Chase & Co. (File No. 333-52826) filed June 13, 2001).

4.3(b)		Sixth Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and Bankers Trust Company (succeeded by Deutsche Bank Trust Company Americas), as Trustee, to the Indenture, dated as of May 25, 2001 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).

4.4		Indenture, dated as of February 19, 2016, among JPMorgan Chase Financial Company LLC, JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4(a)(7) to the Registration Statement on Form S-3 of JPMorgan Chase & Co. and JPMorgan Chase Financial Company LLC (File No. 333-209682) filed February 24, 2016).



4.5		Form of Deposit Agreement (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3 of JPMorgan Chase & Co. (File No. 333-191692) filed October 11, 2013).

4.6		Form of Warrant to purchase common stock (incorporated by reference to Exhibit 4.2 to the Form 8-A of JPMorgan Chase & Co. (File No. 1-5805) filed December 11, 2009).

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		Deferred Compensation Plan for Non-Employee Directors of JPMorgan Chase & Co., as amended and restated July 2001 and as of December 31, 2004 (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2007).(a)

10.2		2005 Deferred Compensation Plan for Non-Employee Directors of JPMorgan Chase & Co., effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2007).(a)

10.3		2005 Deferred Compensation Program of JPMorgan Chase & Co., restated effective as of December 31, 2008 (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)

10.4		JPMorgan Chase & Co. Long-Term Incentive Plan as amended and restated effective May 19, 2015 (incorporated by reference to Appendix B of the Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 8, 2015).(a)

10.5		Key Executive Performance Plan of JPMorgan Chase & Co., as amended and restated effective January 1, 2014 (incorporated by reference to Appendix G of the Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 10, 2013).(a)

10.6		Excess Retirement Plan of JPMorgan Chase & Co., restated and amended as of December 31, 2008, as amended (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)

10.7		Executive Retirement Plan of JPMorgan Chase & Co., as amended and restated December 31, 2008 (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)



10.8		Bank One Corporation Supplemental Savings and Investment Plan, as amended and restated effective December 31, 2008 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)

10.9		Banc One Corporation Revised and Restated 1995 Stock Incentive Plan, effective April 17, 1995 (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)

10.10		Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights, dated as of January 20, 2009 (incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)

10.11		Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for Operating Committee member stock appreciation rights, dated as of February 3, 2010 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)

10.12		Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights and restricted stock units, dated as of January 18, 2012 (incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2011).(a)

10.13		Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights and restricted stock units for Operating Committee members, dated as of January 17, 2013 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2012).(a)

10.14		Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units for Operating Committee members, dated as of January 22, 2014 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended March 31, 2014).(a)

10.15		Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms & Conditions for restricted stock units for Operating Committee members (U.S., E.U. and U.K.), dated as of January 20, 2015 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended March 31, 2015).(a)



10.16		Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units for Operating Committee members, dated as of January 19, 2016 (incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2015).(a)

10.17		Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units for Operating Committee members, dated as of January 19, 2016 (incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2015).(a)

10.18		Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units and restricted stock units for Operating Committee members (U.S. and U.K.), dated as of January 17, 2017 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2016).(a)

10.19		Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units and restricted stock units for Operating Committee members (U.S. and U.K.), dated as of January 16, 2018.(a)(b)

10.20		Form of JPMorgan Chase & Co. Terms and Conditions of Fixed Allowance (UK) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended June 30, 2014).(a)

10.21		Form of JPMorgan Chase & Co. Performance-Based Incentive Compensation Plan, effective as of January 1, 2006, as amended (incorporated by reference to Exhibit 10.27 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)

10.22		Plea Agreement dated May 20, 2015 between JPMorgan Chase & Co. and the U.S. Department of Justice (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed May 20, 2015).

12.1		Computation of ratio of earnings to fixed charges.(b)

12.2		Computation of ratio of earnings to fixed charges and preferred stock dividend requirements.(b)

21		List of subsidiaries of JPMorgan Chase & Co.(b)

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).



Financial:

38	Five-Year Summary of Consolidated Financial Highlights	Audited financial statements:

39	Five-Year Stock Performance	146	Management’s Report on Internal Control Over Financial Reporting

Management’s discussion and analysis:		147	Report of Independent Registered Public Accounting Firm

40	Introduction	148	Consolidated Financial Statements

41	Executive Overview	153	Notes to Consolidated Financial Statements

44	Consolidated Results of Operations

47	Consolidated Balance Sheets and Cash Flows Analysis

50	Off–Balance Sheet Arrangements and Contractual Cash Obligations

52	Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures	Supplementary information:

55	Business Segment Results	277	Selected quarterly financial data (unaudited)

75	Enterprise-wide Risk Management	278	Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials


81	Strategic Risk Management	283	Glossary of Terms and Acronyms

99	Credit and Investment Risk Management

121	Market Risk Management

129	Country Risk Management

131	Operational Risk Management

138	Critical Accounting Estimates Used by the Firm

141	Accounting and Reporting Developments

145	Forward-Looking Statements


(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.


(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%.



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



Selected Consolidated balance sheets data
December 31, (in millions)	2017			2016			Change
Assets
Cash and due from banks	$	25,827		$	23,873		8	%
Deposits with banks	404,294			365,762			11
Federal funds sold and securities purchased under resale agreements	198,422			229,967			(14	)
Securities borrowed	105,112			96,409			9
Trading assets:
Debt and equity instruments	325,321			308,052			6
Derivative receivables	56,523			64,078			(12	)
Securities	249,958			289,059			(14	)
Loans	930,697			894,765			4
Allowance for loan losses	(13,604		)	(13,776		)	(1	)
Loans, net of allowance for loan losses	917,093			880,989			4
Accrued interest and accounts receivable	67,729			52,330			29
Premises and equipment	14,159			14,131			—
Goodwill, MSRs and other intangible assets	54,392			54,246			—
Other assets	114,770			112,076			2
Total assets	$	2,533,600		$	2,490,972		2	%



OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL CASH OBLIGATIONS



Type of off-balance sheet arrangement	Location of disclosure	Page references
Special-purpose entities: variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs	See Note 14	236–243
Off-balance sheet lending-related financial instruments, guarantees, and other commitments	See Note 27	261–266


(a)	Excludes structured notes on which the Firm is not obligated to return a stated amount of principal at the maturity of the notes, but is obligated to return an amount based on the performance of the structured notes.


(b)	Primarily includes dividends declared on preferred and common stock, deferred annuity contracts, pension and other postretirement employee benefit obligations, insurance liabilities and income taxes payable associated with the deemed repatriation under the TCJA.


(c)	For further information, refer to unsettled reverse repurchase and securities borrowing agreements in Note 27.


(d)	Includes accrued interest and future contractual interest obligations. Excludes interest related to structured notes for which the Firm’s payment obligation is based on the performance of certain benchmarks.


(e)	Includes noncancelable operating leases for premises and equipment used primarily for banking purposes. Excludes the benefit of noncancelable sublease rentals of $1.0 billion and $1.4 billion at December 31, 2017 and 2016, respectively. See Note 28 for more information on lease commitments.