JPMORGAN CHASE & CO.

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JPMorgan Chase : 2022 DFAST Results and Methodology Disclosure

06/27/2022 | 04:55pm EDT

2022 Annual Stress Test Disclosure

Dodd-Frank Act Stress Test Results

Supervisory Severely Adverse Scenario

June 27, 2022

Agenda

Page

1

Overview

1

2

2022 Supervisory Severely Adverse Scenario results

3

3

Risks and methodologies

10

Overview

Overview

This 2022 Annual Stress Test Disclosure presents the results of the annual stress test conducted by JPMorgan Chase & Co. ("JPMorgan Chase" or the "Firm") as required under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve") that implement the Dodd-Frank Act Stress Test ("DFAST") requirements ("DFAST Rule"). The results reflect certain forecasted financial measures for the nine-quarter projection period (1Q22 through 1Q24) under the Supervisory Severely Adverse Scenario prescribed by the Federal Reserve. The stress test has been conducted in accordance with the regulations and other requirements of the Federal Reserve.

The results represent hypothetical estimates under the Supervisory Severely Adverse Scenario prescribed by the Federal Reserve on February 10, 2022 and do not represent JPMorgan Chase's forecasts of actual expected gains, losses, pre-provision net revenue ("PPNR"), net income before taxes, capital, risk-weighted assets ("RWA"), or capital ratios.

The results were calculated using forecasting models and methodologies developed by JPMorgan Chase. The Federal Reserve conducts its own stress tests of large banks, including JPMorgan Chase, based on forecasting models and methodologies developed by the Federal Reserve1. Because the models and methodologies utilized by the Firm and the Federal Reserve are different, the results separately published by the Federal Reserve2 may vary from those disclosed in this report. JPMorgan Chase may not be able to explain the differences between the results published in this report and the results published by the Federal Reserve. This report does not include information on the Firm's 2022 Stress Capital Buffer ("SCB") requirement, which will be published by the Federal Reserve by August 31, 2022.

JPMorgan Chase's results reflect the standardized set of capital action assumptions that are specified in the Federal Reserve's DFAST Rule3 for each quarter of the projection period, as follows:

  • No dividends on any instruments that qualify as common equity tier 1 capital ("CET1");
  • Payments on instruments that qualify as additional tier 1 capital or tier 2 capital equal to the stated dividend, interest, or principal due on such instrument;
  • No redemption or repurchase of any capital instrument that is eligible for inclusion in the numerator of a regulatory capital ratio; and
  • No issuances of common stock or preferred stock

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, Chief Executive Officer and Operating Committee. Capital adequacy and stress testing is subject to oversight at the most senior levels of the Firm, including the Firm's Board of Directors. The annual DFAST Stress Test is subject to a

governance framework, which includes oversight by the Board of Directors, the Firmwide Asset and Liability Committee, Capital Governance Committee, the

Firmwide and line of business ("LOB") Chief Financial Officers and Chief Risk Officers, Model Risk Governance and Review, and Internal Audit.

  1. https://www.federalreserve.gov/publications/files/2022-march-supervisory-stress-test-methodology.pdf
  2. https://www.federalreserve.gov/publications/files/2022-dfast-results-20220623.pdf

3 12 CFR 252.56(b)

1

Overview

2022 Stress Test Supervisory Severely Adverse Scenario

The Supervisory Severely Adverse Scenario is characterized by a severe global recession, accompanied by a period of heightened stress in commercial real estate and corporate debt markets

Key economic variables in the Supervisory Severely Adverse Scenario prescribed by the Federal Reserve1

  • U.S. real GDP - GDP declines 3.6% to its trough in the first quarter of 2023
  • U.S. unemployment rate - Unemployment rate rises 5.8 percentage points to a peak level of 10% in the third quarter of 2023
  • U.S. inflation - The annualized rate of change in the Consumer Price Index ("CPI") decreases from 8.2% in the fourth quarter of 2021 to 1.3% in the third quarter of 2022
  • Real estate prices - House prices decline 28.5% through the fourth quarter of 2023 relative to their level in the fourth quarter of 2021; commercial real estate prices decline by 39.6% by the fourth quarter of 2023 relative to their level in the fourth quarter of 2021
  • Equity markets - Equity prices decline by 55.0% through the fourth quarter of 2022; equity market volatility peaks in the second quarter of 2022
  • Short-termand long-term rates from 1.6% in the fourth quarter of
  • Short-termTreasury rates remain unchanged from 0.1% in the fourth quarter of 2021; long-term Treasury rates drop 2021 to 0.7% in the first quarter of 2022, gradually recovering to 1.3% by the first quarter of 2024
  • Mortgage rates - 30-year mortgage rates rise 0.7 percentage points to a peak of 3.8% in the fourth quarter of 2022 before declining to 3.5% by the first quarter of 2024
  • Credit spreads - The spread between yields on BBB corporate bonds and yields on long-term Treasury securities widen 470bps to a peak of 580bps in the fourth quarter of 2022
  • International - The Scenario features slowdowns starting in the first quarter of 2022 in all developed country blocs, leading to recessions in the Euro area, the United Kingdom, and Japan

Additional components2

  • The Firm is also subject to the following additional components as part of the 2022 Supervisory Severely Adverse Scenario:
    • Global market shock - set of hypothetical shocks to a large set of risk factors which stress trading, private equity, and certain other fair-valued positions
    • Counterparty default - involves the unexpected default of the Firm's largest counterparty determined by net stressed losses
  1. For the full scenario description and a complete set of economic variables provided by the Federal Reserve, see Board of Governors of the Federal Reserve System "Federal Reserve Board releases hypothetical scenarios for its 2022 bank stress tests" (February 10, 2022) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20220210a1.pdf
  2. As prescribed by the Federal Reserve, the "as-of" date for the 2022 Annual Stress Test Global Market Shock and Counterparty Default components can be any date during the business week of October 4, 2021

2

Agenda

Page

1

Overview

1

2

2022 Supervisory Severely Adverse Scenario results

3

JPMorgan Chase & Co.

3

JPMorgan Chase Bank, N.A.

8

3

Risks and methodologies

10

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

JPMorgan Chase & Co. published this content on 27 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 June 2022 20:54:05 UTC.


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