Bloomberg News

JPMorgan Joins Goldman Sachs in Clearing Fed Capital-Plan Review

December 02, 2013

JPMorgan CEO Jamie Dimon

JPMorgan Chief Executive Officer Jamie Dimon said yesterday "We are pleased that the Fed determined that our CCAR process improvements met their expectations.” Photographer: Pete Marovich/Bloomberg

JPMorgan Chase & Co. (JPM:US) and Goldman Sachs Group Inc. (GS:US), the world’s biggest trading firms, had their revised capital plans for 2013 cleared by the Federal Reserve yesterday, a month before next year’s submissions are required.

While the Fed didn’t object to the banks’ proposals in March, the New York-based firms were required to resubmit them after weaknesses were found in projections of revenue and potential losses, a Fed official said at the time. The submissions from all 18 banks in this year’s Comprehensive Capital Analysis & Review, or CCAR, are now approved ahead of the next round due the first week of January.

Regulators, intent on preventing a repeat of the 2008 credit crisis, run annual stress tests to see how the largest lenders would fare in a recession or economic shock. Banks need Fed approval to raise dividends and increase share buybacks. Yesterday’s announcement is a welcome development for JPMorgan, the subject of more than a half dozen U.S. probes, said Marty Mosby, a bank analyst with Guggenheim Securities LLC.

“Though this is more of a procedural holdover from the 2013 CCAR, it just reassures JPMorgan investors that while there were significant overhang issues, and still are to a degree, there is still a base of capital and risk management that regulators generally believe is more than adequate,” Mosby said. “That makes this a little more newsworthy than it would’ve been otherwise.”

JPMorgan and Goldman Sachs were among four firms forced to revise their capital plans by the end of September.

Ally, BB&T

Ally Financial Inc.’s resubmission was approved last month, clearing the way for the Detroit-based auto lender to sell stock in a private placement and repurchase preferred securities held by the U.S., the company said at the time. BB&T Corp., based in Winston-Salem, North Carolina, got Fed approval in August.

The 2013 test required the 18 firms to submit plans for managing their capital, which could include repurchasing shares and boosting payouts. The central bank then gauged how strong each bank would be with the funds that remained.

“We are pleased that the Fed determined that our CCAR process improvements met their expectations,” JPMorgan Chief Executive Officer Jamie Dimon said yesterday in a statement, citing the work of hundreds of employees involved in the resubmission. His bank is the largest in the U.S. by assets.

Goldman Sachs acknowledged the Fed’s announcement in its own statement and declined to comment further.

JPMorgan and Goldman Sachs exhibited weaknesses in their capital planning that were “significant enough to require immediate attention, even though those weaknesses do not undermine the quantitative results of the stress tests for that firm or the overall reliability of the firm’s capital-planning process,” the Fed said in March.

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $61.11 USD
    • -0.21
    • -0.34%
  • GS
    (Goldman Sachs Group Inc/The)
    • $186.2 USD
    • -1.69
    • -0.91%
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