JPMorgan Chase’s JPM European arm, J.P. Morgan SE, has been fined €12.18 million ($14.32 million) by the European Central Bank (ECB) for incorrectly reporting its capital requirements. The action follows findings that the bank miscalculated its risk-weighted assets (RWAs), a key metric used to determine how much capital lenders must hold against potential losses.
The decision, announced yesterday, centers on reporting discrepancies that stretched across several years and affected the regulator’s assessment of the bank’s risk exposure.
According to the ECB, between 2019 and 2024, JPMorgan reported lower RWAs than required under regulatory standards. For 15 consecutive quarters, corporate exposures were misclassified, leading to the application of reduced credit risk weights that did not align with banking rules.
When RWAs are understated, capital ratios, which signal a bank’s ability to absorb losses, appear stronger than they actually are.
In addition, for 21 straight quarters, the lender excluded certain transactions when calculating RWAs tied to credit valuation adjustment (CVA) risks. CVA risks reflect the possibility that a counterparty in a derivatives contract may default. By omitting these transactions, the reported risk exposure did not fully capture the underlying obligations.
The ECB concluded that the inaccurate figures prevented supervisors from obtaining a complete and accurate view of the bank’s risk profile. It further stated that the breaches were committed with serious negligence, citing clear shortcomings in internal processes and controls that failed to detect the errors in a timely manner. The credit risk breach was categorized as “severe,” while the CVA-related breach was deemed “moderately severe.”
JPM acknowledged the penalty and said that the matter was fully addressed. A spokesperson stated that the issues were proactively identified and self-reported, and have since been remediated.
The regulator has noted that the decision may be challenged before the court of justice of the European Union.
JPMorgan has emphasized that it has consistently maintained strong capital buffers and that its prudent capitalization approach remains unchanged.
Thus, while the financial penalty is modest relative to the bank’s scale, the case underscores the importance regulators place on accurate risk reporting and robust internal controls within Europe’s banking system.
In the past six months, shares of JPMorgan have gained 5.7% compared with the industry’s 10.9% growth.
