The European Central Bank (ECB) said on Thursday it had imposed two administrative penalties totaling 12.18 million euros on JPMorgan's European arm for misreporting capital requirements after wrongly calculating risk-weighted assets.
The ECB found that between 2019 and 2024, JPMorgan reported lower risk-weighted assets than it should have done. The bank also failed, for 21 straight quarters, to include certain transactions when calculating its risk-weighted assets linked to credit valuation adjustment risk, which reflects the possibility that the other party in a derivatives contract may fail to meet its obligations.
The ECB said that the bank committed both breaches with serious negligence, driven by evident deficiencies in its internal processes, blaming the bank's internal controls for failing to detect the breaches on time.
The ECB concluded that the lender overstated its capital ratios, preventing supervisors from having a full and accurate view of its risk profile.
In determining the 12.18-million-euro penalty, the ECB classified the credit risk breach as "severe" and the credit valuation adjustment breach as "moderately severe" under its administrative sanctions framework.
JPMorgan reserves the right to challenge the ECB's decision before the Court of Justice of the European Union, the central bank said in a statement.
ECB fines JPMorgan 12.2 mln euros over capital reporting error
