The Reserve Bank of India (RBI) has issued a draft circular on the <keyword id="22548614" type="General" weightage="20" keywordseo="Basel-III-framework" source="keywords">Basel III framework</keyword> regarding liquidity standards, as announced in the April monetary policy, inviting comments from <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> and stakeholders on the draft by August 31, 2024. The central bank stated that banks under the <keyword id="20479869" type="General" weightage="20" keywordseo="liquidity-coverage-ratio" source="keywords">Liquidity Coverage Ratio</keyword> (LCR) framework must maintain a stock of high-quality liquid assets (<keyword id="20485904" type="General" weightage="20" keywordseo="HQLA" source="keywords">HQLA</keyword>) to cover expected net cash outflows over the next 30 days. After reviewing the <keyword id="22551976" type="General" weightage="20" keywordseo="LCR-framework" source="keywords">LCR framework</keyword> for banks in India, the RBI decided that banks should assign an additional five percent run-off factor for retail deposits enabled with <keyword id="22551977" type="General" weightage="20" keywordseo="internet-and-mobile-banking" source="keywords">internet and mobile banking</keyword> facilities (IMB). Notably, run-off rate is the percentage of outstanding balance the bank has against each type of liability, which can generate cash outflows over 30 days. This is important in situations when the bank's liquidity levels are in serious stress, or when people begin withdrawing their funds from the bank in significant numbers, adversely affecting the bank's total capital and its ability to finance such outflows. In essence, the banks have been asked to assign an additional 5% run-off rate to all less stable deposits that have been enabled via IMB. This takes their total run-off rate to 15%, while it stays at 10% for other stable retail deposits via IMB. The addition comes in line with the increased usage of online banking, where customers do not need to physically queue up in front of banks in order to make fund transfers. "Banking has undergone rapid transformation in recent years. While increased usage of technology has facilitated the ability to make instantaneous bank transfers and withdrawals, it has also led to a concomitant increase in risks, requiring proactive management," said RBI. The draft circular also stated that unsecured wholesale funding from non-financial small business customers should be treated like retail deposits. The draft also proposes the creation of Level 1 HQLA in the form of government securities, which should be valued at no more than their current market value, after being adjusted for applicable haircuts as mandated under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) requirements. Recently, some incidents have shown the increased ability of depositors to quickly withdraw or transfer deposits during times of stress using digital banking channels. Such emerging risks may necessitate revisiting certain assumptions under the LCR framework. Therefore, the RBI has proposed modifications to the LCR framework to facilitate better management of liquidity risk by banks. Additionally, deposits previously excluded from LCR computation, such as non-callable fixed deposits, will be treated as callable if pledged as collateral for a credit facility or loan. The draft circular applies to all commercial banks, excluding payment banks, regional rural banks, and local area banks, and is proposed to take effect from April 1, 2025. Anil Gupta, Senior Vice President and Co-Group Head Financial Sector Ratings, ICRA Ltd notes that this move is likely to increase the outflows in the next 30 day bucket for banks, thereby posing higher requirements of HQLAs. Additionally, the applicability of haircuts on the government securities for inclusion in HQLA is likely to reduce the value of existing HQLAs for LCR computation. "Overall, this will pose requirements for higher liquid assets (G-secs) for the banks to shore up their LCRs, which will be adversely impacted by the guidelines. The proposed changes are positive for strengthening the liquidity position of the banks and banks are likely to build up the G-sec in run up to the implementation of these guidelines, which will further aid in achieving regulatory directives of moderating credit to deposit ratio of banks", he continued.

RBI proposes higher liquidity coverage ratio for retail deposits, creation of level-1 high quality assets

<div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53c504946da811fc33b11c06-1199-898/jpmorgan-jpmorgan-chase-jp-morgan-4.png" border="0" alt="JPMorgan, JPMorgan Chase, JP Morgan" />Reuters/ Andrew Burton</div></div></div>JPMorgan Chase beat earnings expectations even after a big legal expense. 
For Q2, the bank reported EPS of $1.59.
The firm had a legal expense of 13 cents per share. Even excluding the legal expense, it still beat earnings expectations. 
The largest U.S. bank was expected to report adjusted EPS of $1.31 for the second quarter, according to Bloomberg.
Revenue came in at $25.3 billion, which also beat analyst estimates.
Revenue for Q2 was expected to come in at $23.89 billion, Bloomberg data shows.
As expected, the bank's trading revenue for Q2 was down year-over-year.
"Markets &amp; Investor Services revenue was $5.9 billion, down 12% from the prior year. Fixed Income Markets revenue of $3.5 billion was down 15% from the prior year on historically low levels of volatility and lower client activity across products. Equity Markets revenue of $1.2 billion was down 10% compared with the prior year, primarily on lower derivatives revenue. Securities Services revenue was $1.1 billion, up 5% from the prior year primarily driven by higher net interest income on increased deposits. Credit Adjustments &amp; Other revenue was a gain of $125 million driven by gains, net of hedges, related to funding valuation adjustments/DVA, compared with a gain of $274 million in the prior year which was primarily driven by DVA," the earnings statement said.
Back in May, the bank <a href="http://www.businessinsider.com/jpmorgan-sees-q2-market-revenue-down-20-2014-5">warned that it's market revenue for the second quarter could be down 20%</a> because of the "challenging environment." 
Meanwhile, the bank's mortgage business completely tanked during the second quarter.
"Mortgage Production pretax income was $63 million, a decrease of $519 million from the prior year, reflecting lower revenue, partially offset by lower expense and lower repurchase losses. Mortgage production-related revenue, excluding repurchase losses, was $339 million, a decrease of $947 million from the prior year, primarily on lower volumes. Production expense2 was $413 million, a decrease of $307 million from the prior year, predominantly due to lower headcount-related expense. Repurchase losses for the current quarter reflected a benefit of $137 million, compared with a benefit of $16 million in the prior year," the release states. 
The bank noted that mortgage application volumes were down 54% from Q2 in 2013. They were up 15% from the first quarter.
Also, JPMorgan CEO Jamie Dimon disclosed earlier this month that <a href="http://www.businessinsider.com/report-jamie-dimon-has-curable-throat-cancer-2014-7">he has curable throat cancer</a>.
Shares are up about 1% in the pre-market. 
Here's an excerpt from <a href="http://finance.yahoo.com/news/jpmorgan-chase-reports-second-quarter-105900069.html">the release:</a> 
NEW YORK--(BUSINESS WIRE)--
JPMorgan Chase &amp; Co. (<a href="http://finance.yahoo.com/q?s=jpm" data-rapid_p="8">JPM</a>):
<ul style="padding-left: 30px;">
<li class="bwlistitemmargb" style="padding-left: 30px;">The Firm had strong underlying performance2, notwithstanding industry-wide headwinds in Markets and Mortgage
<ul style="padding-left: 30px;">
<li class="bwlistitemmargb" style="padding-left: 30px;">Consumer &amp; Community Banking: average Consumer &amp; Business Banking deposits up 9%; credit card sales volume1 up 12%; record client investment assets up 19%; record Business Banking loan originations up 46%</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Corporate &amp; Investment Bank: maintained #1 ranking for Global Investment Banking fees with 8.2% wallet share YTD; assets under custody up 14%</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Commercial Banking: period-end loan balances up 9%, driven by 14% growth in Commercial Real Estate; gross investment banking revenue with Commercial Banking clients up 25%</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Asset Management: twenty-first consecutive quarter of positive net long-term client flows; record client assets up 15%; record loan balances up 17%</li>
</ul>
</li>
</ul>
<ul style="padding-left: 30px;">
<li class="bwlistitemmargb" style="padding-left: 30px;">Second-quarter results3 included as a significant item $500 million after-tax Firmwide legal expense ($0.13 per share after-tax decrease in earnings; $669 million pretax expense)</li>
</ul>
<ul id="yui_3_16_0_1_1405422121335_589" style="padding-left: 30px;">
<li id="yui_3_16_0_1_1405422121335_588" class="bwlistitemmargb" style="padding-left: 30px;">Approximately $3 billion returned to shareholders in 2Q14
<ul id="yui_3_16_0_1_1405422121335_587" style="padding-left: 30px;">
<li id="yui_3_16_0_1_1405422121335_586" class="bwlistitemmargb" style="padding-left: 30px;">Repurchased $1.5 billion of common equity4</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Increased common stock dividend to $0.40 per share</li>
</ul>
</li>
</ul>
<ul style="padding-left: 30px;">
<li class="bwlistitemmargb" style="padding-left: 30px;">Fortress balance sheet maintained
<ul style="padding-left: 30px;">
<li class="bwlistitemmargb" style="padding-left: 30px;">Common Equity Tier 11,5 of $161 billion, or ratio of 9.8%</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Strong liquidity - compliant with LCR6 - HQLA7 of $576 billion</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Firm Supplementary Leverage Ratio ("SLR")1,8 of 5.4%</li>
</ul>
</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Core loans1 up 8% compared with the prior year</li>
</ul>
<ul id="yui_3_16_0_1_1405422121335_573" style="padding-left: 30px;">
<li id="yui_3_16_0_1_1405422121335_572" class="bwlistitemmargb" style="padding-left: 30px;">JPMorgan Chase supported consumers, businesses and our communities
<ul id="yui_3_16_0_1_1405422121335_571" style="padding-left: 30px;">
<li id="yui_3_16_0_1_1405422121335_570" class="bwlistitemmargb" style="padding-left: 30px;">$1.0 trillion of credit and capital raised for the first six months of 20141
<ul id="yui_3_16_0_1_1405422121335_775" style="padding-left: 30px;">
<li id="yui_3_16_0_1_1405422121335_774" class="bwlistitemmargb" style="padding-left: 30px;">$93 billion of credit for consumers</li>
<li id="yui_3_16_0_1_1405422121335_812" class="bwlistitemmargb" style="padding-left: 30px;">$10 billion of credit for U.S. small businesses</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">$296 billion of credit for corporations</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">$611 billion of capital raised for clients</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">$33 billion of credit and capital raised for nonprofit and government entities, including states, municipalities, hospitals and universities</li>
</ul>
</li>
<li class="bwlistitemmargb" style="padding-left: 30px;">Hired over 7,200 U.S. veterans and service members since 2011</li>
</ul>
</li>
</ul>
<table class="bwtablemarginb" style="padding-left: 30px;" cellspacing="0">
<tbody style="padding-left: 30px;">
<tr style="padding-left: 30px;">
<td style="padding-left: 30px;"> </td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignb bwalignl" style="padding-left: 30px;">1 For notes on non-GAAP financial measures, including managed basis reporting, see page 12.For additional notes on financial measures, see page 13.</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignb bwalignl" style="padding-left: 30px;">
2 Percentage comparisons noted in the bullet points are calculated versus the prior-year second quarter.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignt bwalignl" style="padding-left: 30px;">
3 Second quarter results also included other, less significant open (positive and negative) non-core items.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignm" style="padding-left: 30px;">
4 The repurchase amount is presented on a trade-date basis.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignm" style="padding-left: 30px;">
5 Represents the estimated impact of Basel III Advanced fully phased-in capital rules the Firm will be subject to as of January 1, 2019.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignb bwalignl" style="padding-left: 30px;">
6 Liquidity Coverage Ratio ("LCR") is based on the current understanding of the proposed rules.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignb bwalignl" style="padding-left: 30px;">
7 HQLA ("High Quality Liquid Assets") is the estimated amount of assets that will qualify for inclusion in the Basel III Liquidity Coverage Ratio.
</td>
</tr>
<tr style="padding-left: 30px;">
<td class="bwpadl0 bwvertalignb bwalignl" style="padding-left: 30px;">
8 Reflects the U.S. Final Leverage Ratio NPR issued on April 8, 2014.
</td>
</tr>
<tr style="padding-left: 30px;">
<td style="padding-left: 30px;"> </td>
</tr>
</tbody>
</table>
JPMorgan Chase &amp; Co. (<a href="http://finance.yahoo.com/q?s=jpm" data-rapid_p="9">JPM</a>) today reported net income for the second quarter of 2014 of $6.0 billion, compared with net income of $6.5 billion in the second quarter of 2013. Earnings per share were $1.46, compared with $1.60 in the second quarter of 2013. Revenue1 for the quarter was $25.3 billion, down 2% compared with the prior year. The Firm's return on tangible common equity1 for the second quarter of 2014 was 14%, compared with 17% in the prior year. Core loans increased by 8% compared with the prior year. The Firm repurchased $1.5 billion of common equity in the second quarter.
Jamie Dimon, Chairman and Chief Executive Officer, commented on the financial results: "Despite continued industry-wide headwinds in Markets and Mortgage, the firm has continued to deliver strong underlying performance. Consumer &amp; Community Banking deposit growth and card sales volume both outpaced the industry2, and we had record loan originations in Business Banking. The Corporate &amp; Investment Bank saw strong performance in fees with #1 position in Global IB fees YTD, global debt and equity, global syndicated loans and global long-term debt. Commercial Banking clients generated record investment banking revenues in the first half of the year. Asset Management had excellent performance across all measures."
Dimon continued: "Toward the end of the second quarter, we saw encouraging signs across our businesses including an uptick in wholesale utilization, strengthening pipelines in our commercial and business banking segments, and some improvements in markets activity. While it is too early to assume that this momentum will continue, we have confidence in the long-term growth of the economy.
"Consumers, middle market companies and corporations are in increasingly good financial shape and the labor market is showing steady improvement. JPMorgan Chase provided credit and raised capital of over $1.0 trillion for our clients during the first half of 2014, which included $10 billion for U.S. small businesses."
Dimon concluded: "This quarter marked the 10-year anniversary of JPMorgan Chase and Bank One coming together - the company overcame significant challenges and achieved extraordinary things during this time. Each of our businesses is among the best in the world, with increased market share, strong earnings performance and power, and an unwavering focus on serving our clients, communities and shareholders with distinction and dedication. We continue our progress on adapting to the new global financial architecture and on our control agenda. My pride in the company is greater than ever."

JPMorgan Beats Earnings

<div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5346c153eab8eae82088cdeb-1200-924/jamie-dimon-34.png" border="0" alt="Jamie Dimon" />AP Photo</div></div></div>JP Morgan CEO Jamie Dimon's <a href="http://investor.shareholder.com/jpmorganchase/annual.cfm">annual shareholder letter</a> is out, and in it he has highlighted what he sees as the reasons why the United States is poised for greatness, and what's holding it back.
The list spans everything from the housing recovery and the energy sector to consumer spending and political infighting.
This kind of specificity is what makes Dimon's letters so great that Warren Buffett reads them every year. Dimon doesn't just use the blanket CEO "uncertainty" excuse for why growth is tepid, he prefers to get into the weeds.
"Of course there is risk in the system," he writes "There always was, and there always will be. As a company, we need to be prepared for even the unlikely and unpredictable bad outcomes. But like everything else, it helps to put risk into perspective."
Now for what's going right in the United States:
• Consumers are in increasingly good financial shape. Over 6 million more Americans are working since the depths of the financial crisis. The amount of consumer income that they spend to service their debt is the lowest it has been since it has been recorded, dating back to 1980. And Americans' net worth has been increasing, along with stock market prices and the value of homes.
• Housing has turned the corner in most markets. We've moved from a buyer's market to a seller's market in four years, construction of new homes has steadily improved and home values have increased nationally more than 19% in the past two years due to the strengthening economy. • Capital markets are wide open - credit, for the most part, is flowing freely. (The only exception I see here is that it still is too hard to get a mortgage for many people.)
• Corporations and middle market companies are in extremely good shape. Corporate cash balances now are 11.4% of assets, up from 5.2% in 2000.
• The banking system is almost fully recovered, and banks are better capitalized than they have been in 60 years. Banks had average equity to assets of 11.1% in 2013 - the highest it's been since 1950. And banks in total have $10 trillion in deposits vs. $7.6 trillion in loans today - the lowest loan-to-deposit ratio since 1970. In addition, banks currently hold HQLA of approximately $2 trillion.
• Consumers are benefiting from abundant and less costly oil and gas due to technological advances in extraction.
And what's wrong with the United States:
• Concerns around excessive regulation and red tape - I travel around the U.S. all the time, and this is a loud and growing complaint that I hear from businesses, small to large, across virtually all industries.
• Whether you were for or against "Obamacare," when massive changes to such an important part of the American economy are made, it does create uncertainty for many businesses.
• The inability to face our fiscal reality is a concern. I believe that if we had adopted some form of the Simpson-Bowles plan to fix the debt, it would have been extremely beneficial to the economy.
• Entitlement spending - which now is 60% of federal spending and is growing - is crowding out infrastructure spending and spending on initiatives like research and development and training.
• In addition, uncertainty about the ultimate outcome of the Fed's unconventional QE policy (and our inability to deal with some fiscal issues) makes future Fed policy more complicated.
• Political gridlock resulting not only in our government shutdown but in two debt ceiling crises was damaging and irresponsible.
• U.S. corporate tax policy is hugely inefficient and, at the margin, drives American capital overseas.
• U.S. immigration policy (which we should fix for moral reasons alone) also is driving brains and entrepreneurs overseas. Most economists think a good immigration policy could accelerate U.S. economic growth by 0.2% right away and by 2% over a 10-year period. This, alone, could create 3 million jobs.

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