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JP Morgan's CET1 ratio constrained by standardized RWAs

Created at 30 Jul · 3:37 AM1 source↑ Market-relevant
IN SHORT

JP Morgan's Common Equity Tier 1 (CET1) ratio was once again bound by the standardized capital calculation in the second quarter. This occurred after the bank's regulator-set risk-weighted assets (RWAs) increased by over $100 billion, making it the last of the eight US global systemically important banks to be constrained by this approach.

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Key Numbers

$100 billionincrease in JP Morgan's regulator-set RWAs

Who's Involved

JP Morgan
US global systemically important bank

↳ Why This Matters

This development signifies that all major US banks are now operating under the standardized capital calculation method, potentially impacting their capital requirements and lending capacity.

Key facts

  • JP Morgan's Common Equity Tier 1 (CET1) ratio was again constrained by the standardized capital calculation in the second quarter.
  • This shift occurred because the bank's regulator-set risk-weighted assets (RWAs) increased by over $100 billion.
  • JP Morgan is the last of the eight US global systemically important banks to be subject to this standardized approach for CET1 capital.

JP Morgan's Common Equity Tier 1 (CET1) ratio was once again bound by the standardized capital calculation in the second quarter. This development occurred after the bank's regulator-set risk-weighted assets (RWAs) increased by more than $100 billion. With this shift, JP Morgan becomes the last of the eight US global systemically important banks to be constrained by the standardized approach for CET1 capital purposes.

Frequently asked questions

The CET1 ratio is a measure of a bank's core equity capital relative to its risk-weighted assets, indicating its financial strength and ability to absorb losses.

RWAs are a bank's assets weighted according to their perceived riskiness, used to determine capital requirements.

The standardized approach is a regulatory method for calculating RWAs, often contrasted with internal model-based approaches.

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How It Developed

JP Morgan's standardized capital calculation became binding for its CET1 ratio in Q2.
The bank's regulator-set risk-weighted assets (RWAs) rose by more than $100 billion.
All eight US global systemically important banks are now constrained by the standardized approach for CET1 capital purposes.

Sources

T1
Standardised RWAs bind JP Morgan’s CET1 ratio againRisk.net

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