JPMorgan Chase & Co. (NYSE:JPM) is in the process of slashing up to $100 billion on client’s excess deposits as it seeks to align its operations in line with a new operation requirement. Chief financial officer, Marianne Lake, has affirmed that the bank will do all it can to stay below the 5% capital buffer, even though, a strong dollar will make the push extremely hard. The bank is also evaluating other means of pairing the requirement to about 4% although they are considered a little bit expensive.
The Federal Reserve was forced to initiate the new proposal to force big banks that pose the biggest threat to financial systems to reduce their reliance on borrowed capital. The move is expected to make banks more resilient to a potential financial crisis as the one evidenced in 2008.
The new rules require banks to bolster their reserves as one of the ways of taking care of large uninsured deposits that are usually susceptible to rapid, unexpected withdrawals. According to the seen Memo JPMorgan Chase & Co. (NYSE:JPM) plans to charge clients for some deposits or encourage them to use alternative products or hold cash at a different firm.
Last year JPMorgan Chase & Co. (NYSE:JPM) handled $1.4 trillion worth of deposits and an additional $2.6 trillion of assets. According to Lake’s presentation the bank is looking for ways to cut its need for capital by eliminating offsetting derivatives contracts while slow reducing the size of its trading book.
JPMorgan Chase & Co. (NYSE:JPM) is already in the process of trimming its branches by 5% as the bank looks to cut on costs as more people shift to using digital devices for banking. Bloomberg reports that up to 300 branches are set to be closed by the end of 2016 with locations up for closure yet to be identified.