Credit Risk Measures Comparison: J.P. Morgan Chase Bank & PNC Bank

This report provides an analysis of the credit risk measures employed by J.P. Morgan Chase Bank and PNC Bank. It examines the methods used by J.P. Morgan Chase, including scored exposure and risk-rated exposure, to assess and mitigate credit risk across various portfolios. The report also delves into PNC Bank's integrated credit risk management model, highlighting its credit concentration process and guidelines for managing credit exposure through customer, industry, and product diversification. Both banks employ different strategies, influenced by market competition and economic changes, to monitor and manage risk, ensuring they meet their strategic goals while staying within their risk appetite. The report includes references to support the analysis of the credit risk measures of both financial institutions.

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Question: Credit Risk Measures of J.P Morgan Chase Bank and PNC Bank
Credit risk management functions in association with the business sections in
recognising and evaluating the exposures across every line of business.
J.P Morgan Chase Bank
The measurement of credit in J.P Morgan Chase Bank is based on the potentiality of
default of counterparty; the loss in the severity provided an event that is default. There are
various measures that are undertaken by the company in order to mitigate the credit risk that
would be beneficial for the development of the organization in the global economy. The
various credit risk measures that have been undertaken by J.P Morgan Chase have been given
below:
Scored exposure
The scored portfolio is specifically kept in CCB and is inclusive of the residential real
estate loans along with the loans related to credit cards, various business banking and auto
loans and student loans. In this kind of portfolio, the estimates of credit loss is based on the
statistical evaluation of the credit losses over the period of 2012 to 2015 and are computed
with the help of the portfolio modelling, decision support mechanism, credit scoring which
looks in to loan extent factors like the credit scores, collateral values and various other risks
(Read.uberflip.com. 2017). The credit loss factors and the evaluation are upgraded on a
quarterly basis and with respect to the situations as the market dictates.
Risk-rated exposure
These kind of portfolios are generally held in CIB, AM and CB and are even inclusive
of the auto dealer loans and the business banking loans that are kept in CCB which are risk
related as they have the features that are identical to the commercial loans. In this kind of

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exposures the credit losses are anticipated are dependent on the default probability and the
severity of the losses (Bluhm, Overbeck and Wagner 2016). The assumptions and the
calculation are reliant on the management information system and the methodologies that are
always under continuous scrutiny. These are the measures that have been undertaken by J.P
Morgan Chase Bank.
PNC Bank
The credit risk measures of PNC Bank have been integrated into the entire
organization risks management governance model. The overall credit system of PNC includes
widespread credit policies, underwriting that is judgmental and statistical in nature, detailed
and frequent risk modelling and measurement, credit training program that is extensive and a
continuous review of the loan (Friewald, Wagner and Zechner 2014). The management of
PNC looks to create and maintain a loan portfolio that would permit it in order to meet their
strategic goals of return by remaining within their appetite of risk (Phx.corporate-ir.net 2017).
The constituent of the credit risk management model has been credit concentration process of
PNC with the help of which the organization maintains a restriction and supervises the credit
exposure with the help of customers, industry and product etc. The risk concentrations are
managed with the help of loan participations with the loan sales and third parties. PNC has
even established guidelines for antisocial and non-performing loans, total borrower exposures
and various other measures of credit to supervise the risk.
It has been observed that there has been a significant level of changes in the risk
taking nature of the organizations due to the rise in competition in the market and changes in
the economy as well. The banks have increased their risk taking abilities because with the
advent of time various new guidelines and credit risk measuring models have been framed in
order to monitor and mitigate the risk.

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Reference List
Bluhm, C., Overbeck, L. and Wagner, C., 2016. Introduction to credit risk modeling. Crc
Press.
Friewald, N., Wagner, C. and Zechner, J., 2014. The Cross‐Section of Credit Risk Premia and
Equity Returns. The Journal of Finance, 69(6), pp.2419-2469.
Phx.corporate-ir.net. 2017. IR Solutions | Investor Relations Management | Nasdaq. [online]
Available at: http://phx.corporate-ir.net [Accessed 31 Aug. 2017].
Read.uberflip.com. 2017. Log in to your account - Uberflip. [online] Available at:
http://read.uberflip.com [Accessed 31 Aug. 2017].