Reports: JPMorgan Chase Faces $22 Bln Capital Shortfall Under New Fed Rule

(RTTNews) - Financial services giant JPMorgan Chase & Co. (JPM) faces a $22 billion capital shortfall under a new rule proposed by the U.S. Federal Reserve, according to media reports on Tuesday.

The Federal Reserve Board said Tuesday that it has proposed a rule to further strengthen the capital positions of the largest, most systemically important U.S. bank holding companies. A company identified as a global systemically important banking organization or GSIB would be subject to a risk-based capital surcharge that is calibrated based on the bank's systemic risk profile.

The Federal Reserve said that eight U.S. banks would currently be identified as GSIBs under the proposal. The eight banks are Bank of America Corp. (BAC), The Bank of New York Mellon Corp. (BK), Citigroup Inc. (C), Goldman Sachs Group, Inc. (GS), JPMorgan Chase & Co., Morgan Stanley (MS), State Street Corp. (STT)and Wells Fargo & Co. (WFC). Collectively, these eight banks are said to face a capital shortfall of $21 billion.

Janet Yellen, Federal Reserve Chair said, "This framework would provide incentives to these banking organizations to hold substantially increased levels of high-quality capital as a percentage of their risk-weighted assets. This, in turn, would encourage such firms to reduce their systemic footprint and lessen the threat that their failure could pose to overall financial stability."

Under the proposal, estimated surcharges for bank holding companies that would be identified as GSIBs currently would range from 1.0 to 4.5 percent of a company's total risk-weighted assets.

Failure to maintain the capital surcharge would subject the GSIB to restrictions on capital distributions and discretionary bonus payments. The proposal would be phased in beginning on January 1, 2016, becoming fully effective on January 1, 2019.

Media reports quoting Fed Vice Chairman Stanley Fischer indicated that JPMorgan has a capital shortfall of $22 billion under the new rules proposed by the Federal Reserve.

Earlier on Tuesday, JPMorgan declared a quarterly dividend of $0.40 per share on the outstanding shares of its common stock. The dividend is payable on January 31, 2015 to stockholders at the close of business on January 6, 2015.

In October, JPMorgan reported a turnaround to profit in the third quarter, boosted by sharply lower legal charges as well as higher revenues. The company's top line beat market estimates with strong performances in most segments.

For the third quarter, the largest U.S. bank by assets posted net income applicable to shareholders of $5.14 billion or $1.36 per share, compared to a loss of $650 million or $0.17 per share in the previous year. Total net revenue increased 5 percent to $24.25 billion from $23.12 billion last year.

JPM closed Tuesday's trading at $62.45, down $0.22 or 0.35 percent on a volume of 19.68 million shares.