JPMorgan No Longer Stands Alone as Most Important Bank

(Bloomberg) -- Global financial regulators said JPMorgan Chase & Co. was no longer the world’s most systemically important bank, recommending a lower capital burden for the firm and several of its rivals.

JPMorgan dropped one rung on the Financial Stability Board’s annual rankings Wednesday to sit alongside Citigroup Inc. and HSBC Holdings Plc as one of the world’s three most important banks. JPMorgan, atop the FSB’s list since 2017, declined to comment on the change, which was based on data from the end of last year.

Wells Fargo & Co. and Goldman Sachs Group Inc. were also found to pose lower risks to the financial system and lowered one level. China Construction Bank Corp., meanwhile, increased one level in this year’s assessment of 30 firms.

The latest list uses information from before the Covid-19 pandemic, which forced lenders to set aside tens of billions of dollars to cover potential credit losses, while authorities eased or delayed rules to help the industry respond. The ratings are based on a bank’s size, scope of cross-border business and connections to other firms, which are used to assess the risk of financial contagion.

JPMorgan, the biggest U.S. bank, has benefited from a surge in revenue from stock and bond trading desks in the midst of the pandemic, which contributed to a surprise increase in third-quarter earnings. Its shares, which plunged with other bank stocks in March, recently rebounded but have still fallen 16% so far this year.

Capital Demands

Banks included in the Basel-based FSB’s list face more stringent capital demands and closer scrutiny of their risk management. The FSB panel, which recommends changes that national supervisors may implement, said shifts in the rankings reflect underlying changes in banks’ activity.

The FSB includes representatives from authorities including the European Central Bank and Bank of England and is chaired by Randal Quarles, a vice chairman of the U.S. Federal Reserve.

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