It’s often the case that when someone doesn’t want to talk about something, it only invites more questions.
The New York Times reports that that’s certainly how it felt on a conference call that JPMorgan Chase held Friday to discuss its second-quarter financial results.
The earnings were relatively strong. Yet for much of the call, the stock analysts who cover JPMorgan asked questions about how a potentially nettlesome regulation might affect the bank.
The bank’s chief financial officer, Marianne Lake, was willing to discuss the subject, but only up to a point. There was one number she seemed to not want to reveal. The issue relates to something called the leverage ratio, a measure of how much capital a bank has.
Since the financial crisis of 2008, regulators have been introducing new rules on capital because they feel higher capital levels makes banks more able to weather storms. That’s because capital can act as a financial cushion that absorbs losses in troubled times. To measure whether it is sufficient, capital is often expressed as a percentage of a bank’s assets. For instance, a bank with $3 in capital and $100 in assets would have a leverage ratio of 3%.
Last week, regulators proposed a new leverage ratio rule. They want large banks to hold capital that meets a certain percentage of assets, plus other risks embedded in their balance sheets. And it measures the ratios at different places in the bank’s corporate structure.
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