OFR: JPMorgan Scores Highest on Systemic Risk Scale
According to a report issued by the Treasury Department’s Office of Financial Research (OFR)on the systemic importance of the largest U.S. bank holding companies, JPMorgan Chase scored highest with a 2013 risk score of 5.05 followed by Citigroup, Bank of America, Morgan Stanley and Goldman Sachs with scores of 4.27, 3.06, 2.60 and 2.48, respectively.
The report was based systemic risk indicators encompassing five categories using size, interconnectedness, substitutability, complexity and cross jurisdictional activity. The study’s numerical score is a measure of a bank’s risk as a ratio of the total risk contained by a worldwide group of banks.
Of the 33 U.S. banks, eight are designated as global systemically important banks (G-SIBs) that must meet a higher risk-based capital ratio to enhance its resilience, and is subject to additional regulatory oversight. The report notes that even though these banks have sufficient capital to meet their risk-based capital ratios, their Tier 1 leverage ratios, which are not risk weighted, remain below those of large U.S. banks that are not G-SIBs.
To read the entire Office of Financial Research report, click here.