It is quite a show when perhaps the most important bank in the nation smacks down the Federal Reserve. What is going on at the Fed? Why do they need to lie about banks and bank resources all over America?
JPMorgan Chase announced late Wednesday that it believes the Federal Reserve may have overestimated a crucial income metric in the bank’s recent stress test results. In an unexpected late-night press release, the bank indicated discrepancies in the Fed’s assessment, particularly in the “other comprehensive income” (OCI) category, which includes revenues, expenses, and losses not accounted for in net income.
According to the Fed’s stress test projections through 2026, JPMorgan was credited with $13 billion in OCI, the highest amount among the 31 banks participating in this year’s examination. The stress tests also estimated the bank would face approximately $107 billion in potential losses from loans, investments, and trading activities under the projected conditions.
JPMorgan said that the Federal Reserve in its recent stress tests underestimated the bank’s potential losses during a severe hypothetical recession https://t.co/TeOgVB1Lrr
— WSJ Markets (@WSJmarkets) June 27, 2024
JPMorgan suggested that if their analysis proves correct, the stress losses they might incur could be higher than those reported by the Federal Reserve. This potential error could affect the bank’s timeline for finalizing its share repurchase plans, which are typically announced after the annual stress test results. A source familiar with the matter, who preferred to remain anonymous, noted that banks were expected to reveal these plans on Friday after the market close, hinting that JPMorgan might need additional time to adjust its strategy based on the revised loss projections.
#India to debut on JPMorgan Bond Index tomorrow, eyes $30 billion in foreign investmenthttps://t.co/J5mFbj110d
— Economic Times (@EconomicTimes) June 27, 2024
The annual stress tests are designed to ensure that large banks can withstand a severe economic downturn. According to Wednesday’s results released by the Fed, all 31 banks involved passed, demonstrating they could endure a significant recession while still maintaining sufficient capital to lend to consumers and businesses.
However, the revelation from JPMorgan follows similar disclosures by other major banks like Bank of America and Citigroup in previous years, where they reported discrepancies between their calculations and the Fed’s results regarding future income projections. These instances underscore a broader concern among banks about the transparency of the Federal Reserve’s testing process and the difficulty in understanding how some results are calculated.
.@ChiTrust is proud to collaborate with dynamic partners like JPMorgan Chase committed to more inclusive business practices, skills training and job creation, neighborhood revitalization, and small business growth. #Chicago #Philanthropy #AnnualReport https://t.co/VRNIYx6YnS
— The Chicago Community Trust (@ChiTrust) June 27, 2024
Key Points:
i. JPMorgan Discrepancy: JPMorgan Chase announced that the Federal Reserve may have overestimated a crucial financial metric, “other comprehensive income,” in its recent stress test results.
ii. Stress Test Findings: The Fed’s stress tests projected JPMorgan to have $13 billion in OCI, the highest among the 31 banks tested, and anticipated about $107 billion in potential losses from loans, investments, and trading.
iii. Potential Corrections: JPMorgan suggests that if their analysis is accurate, the projected stress losses could be higher than those reported by the Fed.
iv. Impact on Plans: The discrepancy may delay JPMorgan’s schedule for finalizing its share repurchase plans, which are typically announced after the stress test results.
v. Transparency Concerns: This issue follows similar past discrepancies reported by other major banks, highlighting ongoing concerns about the transparency and calculation methods of the Fed’s stress tests.
Fallon Jacobson – Reprinted with permission of Whatfinger News
