After several years of deleveraging and capital strengthening at all top-tier US banks, JPMorgan’s balance sheet strength no longer stands out as it once did. Instead, along with its rivals, the bank must think carefully about how to use capital resources that are set to become scarcer again in the face of new regulations. This is particularly significant for the business of financing hedge funds, says Teresa Heitsenrether, JPMorgan’s global head of prime brokerage.
“If 2013 was the year of liquidity, this is the year of leverage. Prime financing does not involve heavy consumption of risk-weighted assets because of the collateralised nature of our financing activity, but it is more significant for capital consumption under the leverage ratio given the emphasis on balance sheet,” she says.
