When it comes to posing systemic risk, America’s biggest bank is in a league all of its own.
By Pam Martens and Russ Martens of Wall Street on Parade.
The National Information Center is a little-known repository of bank data collected by the Federal Reserve. It is part of the Federal Financial Institutions Examination Council (FFIEC), which was created by federal legislation to create uniformity in the examination of U.S. financial institutions by the numerous federal regulators of banks.
Quietly, the National Information Center has done something that has likely made Jamie Dimon hopping mad. Dimon is the Chairman and CEO of JPMorgan Chase who has bragged perpetually in his annual letter to shareholders about how the bank he leads has a “fortress balance sheet.” But now the National Information Center has created a graphic profile of JPMorgan Chase versus its peer banks. The graphics crunch a series of important financial metrics at JPMorgan Chase, showing it to be the riskiest bank in the United States.
The data used to create these graphics come from what is known as the “Systemic Risk Report” or form FR Y-15 that banks have to file with the Federal Reserve. To measure the systemic risk that a particular bank poses to the stability of the U.S. financial system, the data is broken down into five categories of system risk: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity. Those measurements consist of 12 pieces of financial information that banks have to provide on their Y-15 forms. That data shows that in 7 out of 12 financial metrics, JPMorgan Chase has the riskiest footprint among its peer banks.
One of the 12 financial metrics measures the Intra-Financial System Liabilities of each bank. This shows how much money a particular bank has at risk at other banks by using inputs such as how much of its funds it has on deposit with, or has lent to, other financial institutions; the unused portion of any credit lines it has committed to other financial institutions; and its holdings of debt, equity, commercial paper, etc. of other financial institutions. The idea, obviously, is to understand if another Citigroup or Lehman Brothers were to occur, could it bring your bank down…