Reviewing DFAST And CCAR Results. Coming off recent passage of living wills, large banks continue to pass stress tests June 2017

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1 Reviewing DFAST And CCAR Results Coming off recent passage of living wills, large banks continue to pass stress tests June 017

2 Executive Summary The largest banks have more than doubled capital since the crisis. This increase is more than double the amount of TARP for the entire banking industry and makes them more capitalized than their European counterparts. The largest U.S. banks passed the Fed's DFAST and CCAR stress test with more than double the required minimum capital levels. Further, since 013, the largest banks have seen lower loan loss rates, reflecting improved risk management and more conservative balance sheets, and higher starting capital. These increases are also accompanied by long-term debt requirements, which provide even further loss-absorbing capacity for the largest U.S. banks, ensuring the soundness of the U.S. banking system. 1

3 Tier 1 Capital Ratio (%) Capital Ratios Have Increased By Over 50 Percent Even As Risk-Weights Have Become More Difficult Average Tier 1 Capital Ratio For Six Largest Banks % Q 008 Source: Federal Reserve Economic Data, Bloomberg +59% 5.% 9.% Q1 017 Tier 1 Capital Ratio: New, Stricter Requirements: The minimum Tier 1 ratio, with a capital conservation buffer, is 8.5 percent. Tougher Risk-Weights: Updated risk-weights require banks to hold more capital against most types of assets, reducing the ability to 'game' regulators.

4 Percent (%) Large US Banks Pass Fed s Severely Adverse Scenario With More Than Double The Regulatory Minimum Aggregate Common Equity Tier 1 Ratio For The 3 Largest Bank Holding Companies Q 15 Adverse Scenario Source: Federal Reserve, Hamilton Place Strategies calculations Equity Losses Under Hypothetical Crises 1.5 Under the Fed's severely adverse economic scenario, large banks still maintained an aggregate capital ratio of 9. percent, more than.7 percentage points above the regulatory minimum. Severely Adverse Scenario 9. Capital Buffer at Depth of Crisis 3

5 Percent (%) Percent (%) Since The First Stress Tests In 013, Loan Losses Fell And Starting Capital Rose For The Largest Banks Loan-Loss Rates For The Six Largest Banks, 013 to % 013-3% 5.8% 017 Starting Capital For The Six Largest Banks, 013 to % % 1.5% 017 Source: Federal Reserve, Hamilton Place Strategies calculations

6 All Six Largest Banks CCAR, Enabling Them To Go Forward With Their Capital Distribution Plans CCAR 017 Results Bank Bank of America Citigroup Goldman Sachs JPMorgan Chase & Co. Morgan Stanley Wells Fargo Result 5

7 Contextualizing This Historic Increase In Large Bank Equity Capital Banks are less levered than any time in the past 5 years. The largest six banks alone have raised more than double the equity capital that was injected into the entire banking sector through TARP. JPMorgan has enough loss-absorbing capacity to withstand losses at all 33 BHCs in the Federal Reserve s severely adverse scenario. Moreover, U.S. Treasury estimated that extreme losses due to falling oil prices in 015 would only reduce large bank capital by 5 percent. U.S. banks have more capital than their European counterparts. Statutorily, the Federal Reserve has gold-plated international capital requirements. In practice, this means the largest U.S. banks have a higher leverage ratio than the global systemically important financial institution average.

8 Long-Term Debt Requirements Add Even Further Loss- Absorbing Capacity For The Largest Banks Estimated Risk-Based Requirements.1% Additional.5% LTD Eligible LTD Additional Tier 1 8.% 1.5% This rule effectively doubles U.S. banks' simple leverage ratios. "This new standard, which will be implemented in all FSB jurisdictions, is an essential element for ending too-big-to-fail for banks." - FSB Chair Mark Carney Common Equity 9.% 011 Source: Davis Polk 7