Detailed Financial Analysis of JP Morgan Chase: Basel III and Crisis

This report offers a detailed analysis of JP Morgan Chase, examining its key contributions to the US financial system. It delves into the problems associated with debt financing, particularly the challenges faced by financial surplus units. The report provides a comprehensive overview of the changes introduced by Basel III regarding capital adequacy, liquidity, and leverage requirements, and assesses their impact on JP Morgan Chase's financial condition. Furthermore, it explores the process of asset securitization and the bank's motivations for engaging in it. Finally, the report analyzes the implications of the 2008 financial crisis on JP Morgan Chase's financial performance, including the measures implemented by the US government to stabilize the markets. The analysis covers critical aspects such as maturity mismatch, size mismatch and high interest rates.

JP Morgan Chase Analysis 1
JP Morgan Chase Analysis

JP Morgan Chase Analysis 2
Table of Contents
Introduction................................................................................................................................3
1. Background of JP Morgan Chase and its two key roles in terms of its contributions to the
US financial system....................................................................................................................3
2. Problems of Debt Finance Provided By Financial Surplus Unit In Comparison to Financial
Deficit Unit.................................................................................................................................4
3. Main Changes to the Capital Adequacy, Liquidity and Leverage Requirements as
Stipulated by Basel III and Impact of such Changes on JP Morgan’s Financial Conditions.....6
4. Asset Securitization and the Reasons Why Different Financial or Banking Institutions
Might Wish to Securitize.........................................................................................................10
5. Implications of the 2008 financial crisis on JP Morgan’s financial performances shortly
after the crisis...........................................................................................................................13
Conclusion................................................................................................................................16
REFERENCES.........................................................................................................................18

JP Morgan Chase Analysis 3
JP Morgan Chase Analysis
Introduction
The report is about a detailed analysis of JP Morgan Chase. It comprises of a critical
discussion of the key roles this banks plays in contributing to the nation’s financial system. In
addition, it presents some of the problems associated with relying on debt financing provided
by financial institution that is financially surplus compared to the one that is financially
deficit. The report also presents explanations of the main changes to the capital adequacy,
liquidity and leverage requirements as stipulated by Basel III as well as some of the likely
impact of these changes on JP Morgan Chase’s financial conditions. Besides, it presents
explanation of asset securitization process and the reason the bank would wish to securitize.
Finally, it present a detailed discussion of the main implications of the 2008 financial crisis
on JP Morgan Chase’s financial performance shortly after the crisis as well as some of the
measures implemented by the US government to calm its financial markets during that time.
1. Background of JP Morgan Chase and its two key roles in terms of its contributions to
the US financial system
JP Morgan Chase is one of the American multinational financial and banking services firm
based in the New York (JP Morgan, 2016). It is usually amongst the largest financial or
banking institutions across US and sixth largest across the globes by assets with a total assets
of around $2.5 trillion. It is also the second most valuable firm across the world by market
capitalization after commercial and Industrial banks of China (JP Morgan, 2016). In other
words, JP Morgan Chase is one of the main providers of the financial and banking service (JP
Morgan, 2016).

JP Morgan Chase Analysis 4
It provides numerous financial and banking services to governmental, institutional and
corporate customers within the US and internationally. Further, it provides non-interest
bearing deposits, savings accounts, interest-bearing time deposits as well as market deposits
(JP Morgan, 2016). In addition, it offers clients loans such as home equity loans, lines of
credits, residential mortgages, business banking loans, auto loans, as well as other loans. In
other words it offers prime mortgage loans, credit card loans, payment option loans as well as
wholesale loans to numerous clients (JP Morgan, 2016).
To be more specific, JP Morgan Chase is the world leader in banking and financial services,
providing solutions to the global most significant governments, institutions and corporations
in over 100 nations (JP Morgan, 2016). In other words, JP Morgan Chase is the largest bank
and chief provider of financial and banking services across US by profit, market value, sales
and assets. It serves over 1 million clients, small enterprises, and many prominent
institutional, governmental and corporate customers (JP Morgan, 2016). It gives around $200
million every year to the non-profit firms across the globe. It also leads volunteer services
events for the personnel in the local communities by using numerous resources including the
one that stem from the access to capital, global reach, economies of scale and expertise. JP
Morgan Chase invests in its partners and communities with the local firms to offer creative
solutions which are said to respond to the neighbourhood development needs. Its leading
expertise and scale assist in reducing environmental risks while producing new opportunities
in order to make more sustainable worldwide economy (JP Morgan, 2016).
2. Critically explained the Problems of Debt Finance Provided by JP Morgan Chase
with those parties who are a Financial Surplus Unit in Comparison to Financial Deficit
Unit

JP Morgan Chase Analysis 5
Provision of debt finance by JP Morgan Chase to the surplus units as well as deficit units
poses some problems to the bank (Bohn, 1998). For instance, the act of providing debt
finance to financial surplus unit posed numerous issues on maturity mismatch where by it is
forced to provide a loan with minimal or short maturity period. This was hectic to the bank
since given the fact that financial surplus units was having some leverage issues due to the
2008 financial crisis, these units would struggle to meet their short maturity debts obligations
provided by JP Morgan Chase. Such would not occur if the JP Morgan Chase decides to
provide debt to the financial deficit unit that offers long maturity debts (Demetriades &
Andrianova, 2004). In addition, JP Morgan Chase provision of debt finance to financial
surplus unit would be challenging due to size mismatch whereby there are only small funds
available being offered to these banks. For instance, JP Morgan Chase action in providing a
loan to one of the banks in US posed a major problem since it was hectic to get the actual
amount it required to finance its operations as compared to the amount it provided to
financial deficit unit that are large (Demetriades & Andrianova, 2004). In addition, JP
Morgan Chase providing debt finance to units with those parties who are a financial surplus
unit would be hectic since it demands the bank to have as high return as possible (Bohn,
1998). Further, providing debt finance to parties that are financial surplus would be
challenging since it would necessitate the bank to charge relatively high interest rates which
would make the deficit units unable to repay the loans (Bohn, 1998). This would force JP
Morgan Chase to get some collaterals in order to safeguard its loans. Nonetheless, where such
risks are of greater concern, there are other risks involved such as risk of bankruptcy. This
means that if the loans are on fixed rates, the US Fed act of imposing high interest rates
would benefit the depositors but JP Morgan Chase would be forced to strike the balance in
between the returns and risks to remain competitive (Petersen & Wiegelmann, 2014).

JP Morgan Chase Analysis 6
3. Main Changes to the Capital Adequacy, Liquidity and Leverage Requirements as
Stipulated by Basel III and Impact of such Changes on JP Morgan’s Financial
Conditions
Basel III is usually a sequence of measures designed in repairing and augmenting Basel II
accord (Ojo, 2013). This adjunct addresses the issues of the economic pro-cyclicality and
gives suggestions on the means of mitigating such issues through increase in capital charges
when country’s economies overheat as well as when capital charge reduces in the economic
contractions (Kasekende, Bagyenda & Brownbridge, 2011). Basically, the Basel III is far
much stricter and complete than the Basel II. Some of the reforms recommended in the Basel
III include the five facets for enhancing capital, raising quality, transparency and consistency
of capital base, enhancing risk-based capital needs with leverage ratio, enhancing risk
coverage, promoting country-cyclical buffers and reducing pro-cyclicality as well as
addressing interconnectedness and systematic risks (Ojo, 2013). The Basel III comprised of
some measures that are mainly targeted at improving the value and capacity of capital within
the economy, aimed at refining loss-absorption ability in both the liquidation and going
concerns setups. By retaining a minimum capital competence of 8%, Tier 1 was increased to
6% with equity postulated at 4.5% (Jayadev, 2013). These new concepts are for
countercyclical capital bumper and capital conversion bumper which ensured that financial
institutions are capable of absorbing the losses without any breach to the minimum capital
requirements and were capable of carrying their operations even during economic crisis
without deleveraging (Bhowmik, 2014).
Table 1: Regulatory Capital prescriptions under Basel III

JP Morgan Chase Analysis 7
Source: Bhowmik (2014).
The Basel III strengthened the leverage requirement through the use of a stressed input
parameter in determining capital requirements for the counterparty credit default risks. The
Basel III further strengthened liquidity requirements through development of two minimum
standards; the NSFR and LCR (Kcharem, 2014). The LCR was aimed at making the banks to
have sufficient stock of the imaginative high value liquid assets that comprised of assets or
cash which could be in turn be transformed into cash at no or little loss of the worth in the
private markets in meeting its liquidity desires. On the other hand, the NSFR was aimed at
encouraging and incentivising the banks to utilize stable sources in financing their operations.
It usually assist in reducing dependence on the short-term wholesale financing during the
times of the floating market liquidity as well as encouraging better evaluation of the liquidity
risks across all off- and on-balance sheet items (Petersen & Mukkudem-Petersen, 2014).

JP Morgan Chase Analysis 8
The Basel III also introduced the leverage acts as the non-risk sensitive backstop
measurement in reducing risks of the build-up of extreme leverage in the banks and within
the financial system (Kcharem, 2014). This prerequisite would establish an all-inclusive floor
to a minimum capital requirement that would in turn minimizes the probable erosive impact
of the gaming as well as model risk on the capital alongside the true risks. In essence, the
Basel III necessitated financial and banking institutions to gradually increase their capital
ratios and reaching a high capital ratio (Ojo, 2013). Furthermore, Basel III mainly focused on
funding and capital. It specified the new capital ratios. It also set some new standards for the
short-term financing and sketches out needs for the long-term financing. In strengthening
minimum capital needs, Basel III necessitates financial institutions to make adequate high-
quality capital by increasing it common equity tier, introducing qualifying criteria as well as
enlarging the scope of reduction for the goodwill, treasury stock as well as deferred assets
(Kcharem, 2014). Moreover, it mandates enhanced disclosure which in turn affects reporting
on the securitization exposures, components of the regulatory capital ratio and off-balance
sheet vehicles. The Basel III was mainly established to reduce probability of any recurrence
of the global financial crisis (Kcharem, 2014). In essence, it main objectives was to improve s
absorbing capacity of every individual banks. It has some measures in ensuring that financial
institutions system do not crumble and some of its spill-over effect on the economy is
reduced (Raman, 2012).
Furthermore, the change in capital requirements under Basel III, are more likely to enable the
company raise capital set against certain exposures, provide extra incentive to move the OTC
derivatives, contracts to the central counterparties as well as minimize pro-cyclicality; hence,
assisting it reduce the systemic risks across its operations (Petersen & Mukkudem-Petersen,
2014). The change is also more likely to provide some incentives to JP Morgan Chase in
strengthening its risk management of the counterparty credit exposures (Ojo, 2016). To be

JP Morgan Chase Analysis 9
more specific, the change in capital requirements under the Basel III would expose the bank
books to attract some enhanced capital charges. Therefore, JP Morgan Chase would have
common equity capital under the Basel III which would stand it in good stead (Raman, 2012).
Basel III also introduced new liquidity policies aimed at improving resilience of the financial
and banking institutions to liquidity shocks (Ojo, 2013). This necessitated financial
institutions to maintain buffer of extremely liquid securities commonly measured by liquidity
coverage ratio. The buffer is usually aimed at promoting resilience to probable liquidity
disruptions over the month (Petersen & Mukkudem-Petersen, 2014). These standards are
likely to affect JP Morgan Chase financial conditions by ensuring that this bank has adequate
unencumbered, as well as high-liquid assets in offsetting its net cash outflows encountered
under its acute short-term operations. In addition, the new liquidity standards is more likely to
cause a significant downgrade in JP Morgan Chase’s public credit rating, a loss of the
unsecured wholesale financing, increase in derivative substantial and collateral calls on the
non-contractual as well as contractual off-balance sheet revelations, partial loss of deposits as
well as increase in the secured funding haircuts (Raman, 2012).
Another liquidity measure under the Basel III is the net stable financing ratio (Ojo, 2016).
This standard necessitates minimum value of the stable bases of financing at the institutions
in relation to liquidity profile of assets and potential for the provisional liquidity requirements
emerging from the off-balance sheet pledges, over the period. This standard would assist JP
Morgan Chase to border its over-dependence on temporary financing throughout times of the
floating arcade liquidity and would also hearten it to better evaluate its liquidity risk
diagonally through all the off- and on-balance sheet objects (Kcharem, 2014). Such measures
would promote resilience of the bank over the long-term by creating extra incentives for JP

JP Morgan Chase Analysis 10
Morgan Chase to funds its operations with more steady sources of finance on a continuing
basis (Saleuddin, 2015).
The changes in leverage requirements on the other hand would enable the bank to protect
itself against system-wide build-up of the leverage which would in turn cause some
destabilization unwinding process in times of financial stress (Waithaka, 2013). In addition,
the change would protect JP Morgan Chase against the perverse incentive in piling on the
low-risk assets, which might not remain stable under extreme conditions producing some
systemic risks (Petersen & Mukkudem-Petersen, 2014). Furthermore, with introduction of a
more transparent, simple and non-risk-based leverage as the supplementary backstop measure
to capital requirements, JP Morgan Chase would be able to contain excessive risk. Further,
the change in leverage requirements under Basel III would have substantial impact on JP
Morgan Chase’s profitability. In essence, the change would reduce the bank’s return on
equity by around 3% (Kcharem, 2014). Its numerous core operations would also be
profoundly affected, especially securitization and trading businesses (Raman, 2012).
4. Asset Securitization and the Reasons Why Different Financial or Banking Institutions
Might Wish to Securitize
Asset securitization is usually the process of taking illiquid assets and through financial
engineering, transforming these assets into securities (Thakor, 2015).. In other words, asset
securitization is the financial prearrangement that comprises of issues the securities funded by
several assets, in most scenarios debt. In this scenario, the basic assets are usually converted
into securities, therefore the securitization (Giddy, 2001). In essence, securitization is a
complicated procedure that entails several actors as shown in Figure 1 below. Under the
diagram, the firm originally holding the assets usually starts the progression by selling its
assets to lawful entities. The Special Purpose Vehicle helps in limiting the risk of final

JP Morgan Chase Analysis 11
investors’ vis-à-vis and issuers of the assets (Saleuddin, 2015). On the other hand, based on
the circumstance, the SPV disburses securities unswervingly or resells a number of the assets
to the trust. The trust sequentially issues securities since it is utilized for numerous
securitization dealings and thus supervises numerous SPVs. The SPV is considered as more
of a lawful structure compared to component that plays active role in a contract (Giddy,
2001). The most significant responsibility is usually played by the principal, basically the
banks or financial institution, who is said to set up transactions and assesses the pool of total
assets, the manner in which it would be fed, features of securities issued as well as probable
structuring of funds (Thakor, 2015). Further, instead of paying final investors revenues
generated by their assets, amortization regulations are defined in advance. Finally, the
arranger assists in distributing securities to final investors (Saleuddin, 2015).
Figure 1: Assets securitization process: Source: Saleuddin (2015).
JP Morgan Chase might wish to securitize since securitizing its assets would enable it to
refinance its debts (Thakor, 2015). Therefore, securitization comprises assets which are
typically illiquid. Another reason why JP Morgan Chase would wish to securitize its assets is
to produce marketable assets by combining numerous assets which are not readily sold or

JP Morgan Chase Analysis 12
bought in order to generate a significant market for such assets and help it in making up more
valuable pools. Further, JP Morgan Chase would wish to securitize its assets in lessening the
total amount assigned to debt from its balance sheet, which in turn results in corresponding
decrease in its regulatory capital requirements and enables its bring in extra liquidity which
could be utilized in making new loans (Giddy, 2001).
In addition, JP Morgan Chase might securitize for risk management, greater leverage of the
capital, balance sheet issues as well as profiting from the origination fees. In essence, by
securitize their assets, JP Morgan Chases might benefit from moving default risks linked with
securitized debts from their balance sheets allowing for more leverage (Wæver, 2011). As
such, this results in reduced debt risk and loads, whereby JP Morgan Chase could utilize its
capital more effectively. Also, JP Morgan Chase might securitize to reduce asset-liability
mismatch since based on the structure selected, securitization could provide perfect matched
financing by removing the funding exposure in both pricing and duration basis. In essence, JP
Morgan Chase might securitize in order to be in a position to cater for the credit boom since
they securitize their loans and utilize the money to give more credits. JP Morgan Chase might
also securitize with the aim of increasing its profits (Martín-Oliver & Saurina, 2007). This is
based on the notion that securitization provides the bank numerous options for financing its
major activities and managing the risk profile which would in turn result in greater expected
profits. Banks might also securitize for funding motives. In essence, by securitizing its loans,
JP Morgan Chase is said to broaden its source of finances as the past sceptical investors could
no longer have to venture in a bank they do not like, but just portfolio of the securities the
bank originated which investors might consider worth investing. In other words,
securitization permits for segment funding, produced by pooling of the assets so as the bank
could borrow cash from numerous sources at numerous rates, which in turn result in decrease
in marginal costs of the funding (Fabozzi & Kothari, 2008).

JP Morgan Chase Analysis 13
In conclusion, securitization has the capacity to affect JP Morgan Chase’s insolvency risks,
profitability and leverage. Therefore, JP Morgan Chase might securitize in order to transform
its risk profit of assets in the balance sheet. By focusing on assets and holding the liability
fixed, the bank could be able to lower its insolvency risk as it serve as the insurance against
its insolvency in adverse condition of the country’s economy. Furthermore, securitization
would permit JP Morgan Chase to ideally select its disclosures in numerous facets of credit
risks of the basic pool of the loans. Thus, relying on payments for numerous types of the risk
exposures, as well as strict structure of transactions, securitization could assist JP Morgan
Chase to decrease or increase its insolvency risk (Fabozzi & Kothari, 2008).
5. Implications of the 2008 financial crisis on JP Morgan’s financial performances
shortly after the crisis
The 2008 financial crisis is considered as one of the worst crisis since the 1930s Great
Depression (Lo, 2012). This began in the year 2007 with catastrophe in the subprime
mortgage market across US and it then advanced into a complete international banking and
financial crisis with collapse of huge investment banks such as the Lehman Brothers in 15th
September 2008. The current global financial crisis was more global and is said to have wider
effects as compared to any other economic downturn in the last seventy years (Willett, 2012).
In essence, the global financial crisis roots can be traced in US with sub-prime mortgage
crisis where households experienced major challenges in making greater payments on their
mortgages. This was then followed by fast announcement of the trouble amongst numerous
big bans in US by 2008 and widespread credit contractions when banks across the country
tightened their credit policies (Tallberg, Sommerer, Squatrito & Lundgren, 2015). After the
fourth quarter, there was an increased delinquency rate which was found to affect not just the
sub-prime mortgages but also the spill-over into the client and other credits. Its impacts are

JP Morgan Chase Analysis 14
more encompassing as a result of the nature of financial integration and globalization in the
markets within the twenty first century (Thakor, 2015).
Though there was other financial crisis such as the great depression experienced in 1930s, the
2008 financial crisis is anticipated to have far reaching and more impacts as compared to the
great depression. This crisis manifested itself in severe credit, finance and currency crisis that
spread to numerous developed countries in the year 2008 but that lagged in their range in the
least developed and emerging nations (Willett, 2010). Though this financial crisis started due
to events that occurred in the US housing market, it spread across different regions with
serious consequences for the global financial sector (Thakor, 2015). Therefore, the global
financial crisis had significant implication for the financial and banking institutions, and
particularly to the JP Morgan Chase.
To start with, after the 2008 financial crisis, JP Morgan Chase financial performance was
largely hit evidenced by low cash flow in the 2009, which incurred deadweight loses in the
firm without being insolvent. Furthermore, due to the 2007/2008 financial crisis, JP Morgan
Chase was unable to meet its financial obligations to its depositors and creditors as a result of
its incapacity to make sufficient cash, either through its operations (Claessens & Van Horen,
2015). Financial institutions provide benefits to domestic economies, therefore, with the 2008
financial crisis, JP Moran suffered a financial distress due to non-performing loans (Thakor,
2015).
The government employed massive bail-outs and other palliative fiscal and monetary policies
to prevent probable downfall of global financial system (Petersen & Wiegelmann, 2014).
Furthermore, the financial crisis forced JP Morgan Chase to raise capital by disbursing new
shares in order to preserve its capital ratios. Additionally, despite the sharp reduction in

JP Morgan Chase Analysis 15
interest rates globally immediately after the global financial crisis, JP Morgan lending rates
was relatively high, which in turn resulted in severe decline in both corporate and personal
credit (Bolton, 2009). Basically, the 2008 global financial crisis caused a balance sheet crisis
in JP Morgan Chase. Its balance sheets got out of the control immediately after the crisis. For
instance, the ratio of assets to the annual value added for the bank exploded. In addition, its
leverage measured by the assets to total shareholders’ equity also blasted. Information about
liabilities and assets which was held in JP Morgan Chase balance sheets as well as other
forms of the off-balance sheet was increasingly inadequate and incomplete (Claessens & Van
Horen, 2015).
In spite of these impacts, the US government was extremely active in ensuring that financial
systems across the country continued to work properly the financial crisis (Bolton, 2009). In
fact, the government lowered most of its federal funds rates with the aim of providing extra
liquidity to financial systems, prolonged broad range of the security it was ready to take for
the loans, as well as delivered direct lines of the credit to the wider range of the financial
institutions (Petersen & Wiegelmann, 2014). For instance, when some of the institutions were
on a verge of liquidity, the government guaranteed a significant portion of the institutions
liabilities to facilitate their takeover by other banks such as the JP Morgan Chase. This action
assisted in maintaining confidence amongst the financial system customers and liquidity in
financial systems as an effort to reduce the impacts of its financial crisis. The government
also introduced a program that included increase in the FDIC bank deposit insurance to
permit financial institutions to issue the short-term bonds which would carry the government
guarantee and FDIC insurance for numerous deposits in the money market (Thakor, 2015).
The government also introduced additional regulations restricting the capacity of financial
institutions to engage in the property trading. The US government enacted some large fiscal
stimulus, by spending and borrowing in order to counterbalance the decline in financial

JP Morgan Chase Analysis 16
institutions demand contributed by the crisis. The expanded and new liquidity abilities were
mostly aimed at enhancing the central bank fulfil its lender-of-last-resort function within the
financial crisis while moderating the humiliation, widening the set of the financial institutions
with contact to the liquidity as well as snowballing litheness with which the banks could tap
these liquidity (Bolton, 2009). Furthermore, the government guaranteed debt issued by the
financial or banking institutions and raised capital of national financial system purchasing
around $1.5 trillion newly preferred stock in major banks (Willett, 2010). It also implemented
another monetary policy by creating extra currency as a technique of combating liquidity trap
in it financial system. By creating and inserting more currencies into the banks, the
government aimed at spurring the financial institutions to refinance more mortgages and
finance more of the domestic loans (Claessens & Van Horen, 2015). The US government also
bailed out numerous banks by incurring relatively large financial obligations. The FED also
expanded its open market operations in order to offer support to the operations of the credit
market, put downward the burden on the long-term rates as well as assist in making wider
financial situations more accommodative by purchasing the long-term securities for federal
reserve’s portfolio (Petersen & Wiegelmann, 2014).
Therefore, after the 2008 financial crisis, the US government took a wide range of actions in
fulfilling its statutory goals in calming the financial systems from the impacts of the crisis.
Many of the actions entailed significant purchases of the long-term securities to put plunging
force on the long-term interest rates as well as simplifying the entire financial situations
(Claessens & Van Horen, 2015).
Conclusion

JP Morgan Chase Analysis 17
In conclusion, this paper has given me a wider understanding of the US financial systems
particular in regard to JP Morgan Chase and the 2008 financial crisis. From the analysis, it is
evident that JP Morgan Chase plays a crucial role in the US economy. In essence, it is evident
that JP Morgan Chase provides numerous financial and banking services to governmental,
institutional and corporate customers within the US and internationally. It provides non-
interest bearing deposits, savings accounts, interest-bearing time deposits as well as market
deposits. In addition, it can be concluded that the changes stipulated by the Basel III assisted
JP Morgan Chase strengthen its risk management of the counterparty credit exposures. These
measures are also found to promote resilience of the bank over the long-term by creating
extra incentives for JP Morgan Chase to funds its operations with more steady sources of
finance on a continuing basis.

JP Morgan Chase Analysis 18
REFERENCES
Bhowmik, G. (2014). Adoption of Basel III Accord: Impact on the Indian Banking System.
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Bohn, H. (1998). The behavior of US public debt and deficits. the Quarterly Journal of
economics, 113(3), 949-963.
Bolton, B. J. (2009). The US Financial crisis: A summary of causes & consequences.
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Claessens, S., & Van Horen, N. (2015). The impact of the global financial crisis on banking
globalization. IMF Economic Review, 63(4), 868-918.
Demetriades, P., & Andrianova, S. (2004). Finance and growth: what we know and what we
need to know. In Financial Development and Economic Growth (pp. 38-65). Palgrave
Macmillan UK.
Fabozzi, F. J., & Kothari, V. (2008). Introduction to securitization (Vol. 174). Hoboken, NJ:
John Wiley & Sons.
Giddy, I. (2001). The securitization process. Stern School of Business, New York University.
Jayadev, M. (2013). Basel III implementation: Issues and challenges for Indian banks. IIMB
Management Review, 25(2), 115-130.
JP Morgan. (2016). JP Morgan Chase & Co annual report 2016; Viewed at 10th December
2017 from; https://www.jpmorganchase.com/corporate/investor-relations/document/2016-
annualreport.pdf
Kasekende, L., Bagyenda, J., & Brownbridge, M. (2011). Basel III and the global reform of
financial regulation: how should Africa respond. A bank regulator’s perspective, 22.
Kcharem, N. (2014). Analysis of Basel III capital requirements repercussions on the financial
sector and the real economy. Unpublished MSc. Thesis.

JP Morgan Chase Analysis 19
Martín-Oliver, A., & Saurina, J. (2007). Why do banks securitize assets. In XV Spanish
Finance Forum Conference Proceedings.
Lo, A. W. (2012). Reading about the financial crisis: A twenty-one-book review. Journal of
economic literature, 50(1), 151-178.
Ojo, M. (2016). Implementing Basel III through the Capital Requirements Directive (CRD)
IV: leverage ratios and capital adequacy requirements.
Ojo, M. (2013). Leverage ratios and Basel III: proposed Basel III leverage and supplementary
leverage ratios.
Petersen, M., & Mukkudem-Petersen, J. (2014). Basel III liquidity regulation and its
implications. Business Expert Press.
Petersen, H. G., & Wiegelmann, A. M. (2014). Financial markets and the global debt crisis:
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Saleuddin, R. (2015). Securitization Markets and Mechanisms. In Regulating Securitized
Products (pp. 20-60). Palgrave Macmillan UK.
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Thakor, A. V. (2015). The financial crisis of 2007–2009: Why did it happen and what did we
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JP Morgan Chase Analysis 20
Willett, T. (2010). Some lessons for economists from the financial crisis. Indian Growth and
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JP Morgan Chase Analysis 21
Appendix: Explanation on how the questions were done
To start with thorough research was conducted on each and every question. In question
number one, relevant information regarding JP Morgan Chase was obtained from the bank
annual report. This information assisted in discussing about the company, its overall
operations and the role it has played in contributing to the country’s financial system.
Secondly, in question two, an explanation of what surplus and deficit units was provided.
Then a detailed explanation of the issues related to debt finance provided by surplus unit was
offered with JP Morgan Chase debt financing from financial surplus units being presented as
a relevant example
Third, an explanation of Basel III accord and some of the changes made were obtained from
journal articles and website and this was linked with JP Morgan Chase. In other words, after a
discussion of Basel III changes in capital, leverage and liquidity requirements, a detailed
analysis of the impact of these changes to JP Morgan financial condition was assessed.
Four, material on asset securitization were perused and analysed after which a diagram
explaining about asset securitization was derived. After the explanation of asset
securitization, an assessment on why JP Morgan might wish to securitize its assets was
conducted.
Fifth, analysis of the 2008 financial crisis was conducted. This analysis included an
explanation of the crisis and the impact the crisis had on JP Morgan. In other words, after the
explanation of the 2008 financial crisis, a detailed analysis of implications this crisis had to
JP Morgan immediately after the 2008 was presented. Finally, the question is enclosed with
explanations of some of the measures taken by US government after the 2008 crisis to ensure
continuity and growth of its financial system.
The report is wrapped up with a conclusion that provide summary of what was done in the
whole paper.