Jamie Dimon on Operational Risk - extracted from 2018 Annual Report, JPMorgan Chase & Co.

We also need to get the recalibration of other regulatory requirements right, particularly around operational risk capital, the Fed’s Comprehensive Capital Analysis and Review (CCAR) stress test and the additional allocation of capital to global systemically important banks (GSIB). If we don’t do so, certain products and services will continue to be pushed outside the banking system (where they are, fundamentally, not regulated), distorting markets and raising the cost of credit for clients.

Operational risk capital. We now hold nearly $400 billion of operational risk-weighted assets, which means we hold more than $40 billion of equity for assets that don’t exist. This was a new calculation added after the crisis to recognize that banks also bear serious operational risk (stemming from lawsuits, processing errors and other issues). I agree that all banks bear operational risk, yet this is also true for all companies. Most companies, including banks, have earnings to pay for operational risk. And the calculation that gets us to $400 billion is questionable and so complex that I am not going to explain it here. Finally, most of our operational risk assets stem from Bear Stearns and WaMu subprime mortgage products that we don’t even offer anymore. Tying up capital in perpetuity – looking for shadows on the wall – is probably not the best idea for fostering growth in America.

read the full letter at :

https://reports.jpmorganchase.com/investor-relations/2018/ar-ceo-letters.htm?a=1