The ECB has imposed administrative penalties totalling €12.18m on J.P. Morgan SE after identifying significant errors in the bank’s reporting of risk-weighted assets, a core measure used to determine capital requirements.
The supervisory action follows findings that, between 2019 and 2024, the bank reported lower risk-weighted assets than required under banking rules. According to the ECB, this misreporting stemmed from two distinct breaches. For 15 consecutive quarters, J.P. Morgan SE misclassified certain corporate exposures, applying a lower credit risk weight than prescribed. In addition, for 21 consecutive quarters, the bank excluded certain transactions when calculating risk-weighted assets related to credit valuation adjustment (CVA) risk — a metric designed to capture the risk that a counterparty to a derivative contract may default.
The ECB determined that both breaches were committed with serious negligence. The regulator pointed to evident deficiencies in the bank’s internal processes, noting that its internal controls failed to detect the errors in a timely manner.
Risk-weighted assets are central to prudential supervision, as they underpin the calculation of a bank’s minimum capital requirements. By underestimating its risk-weighted assets, J.P. Morgan SE consequently reported higher capital ratios than it should have done. Capital ratios are widely regarded as key indicators of a bank’s financial resilience and its capacity to absorb potential losses during periods of stress.
The misreported figures were submitted to the ECB, thereby preventing the supervisor from maintaining a fully comprehensive view of the bank’s risk profile during the affected periods. The accuracy of such data is critical to the ECB’s supervisory mandate across the euro area banking sector, particularly as regulatory scrutiny of capital adequacy and risk modelling continues to intensify.
In determining the financial penalties, the ECB applied its Guide to the method of setting administrative pecuniary penalties. Within its established severity categories — ranging from “minor” to “extremely severe” — the central bank classified the credit risk breach as “severe” and the CVA risk breach as “moderately severe”. These classifications informed the overall penalty of €12.18m.
The ECB has confirmed that the bank retains the right to challenge the decision before the Court of Justice of the European Union.
The sanctions underscore the continued regulatory focus on accurate capital reporting, internal governance and robust risk management controls across the European banking system, as supervisors seek to ensure transparency and resilience in an increasingly complex financial environment.
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