JPMorgan Chase & Co (JPM.N) bears the highest potential hazard to the financial system, a study by a U.S. government research agency showed, launching its first ranking of U.S. banks with a numerical risk score.
The bank had a “systemic risk score” of 5.05 percent for 2013 in a group of 33 large U.S. banks, the Treasury Department’s Office of Financial Research said in the study.
The number was based on metrics such as size, interconnectedness, complexity and cross-border activities, OFR said. It said the study reflected the views of the authors, not of the office or the Treasury Department.
The number is a measure of a bank’s risk as a ratio of the 100 percent total in a worldwide group of banks. The method is designed by the Basel Committee of global bank regulators.
Citigroup Inc (C.N) was the second-most risky, with a score of 4.27 percent. Bank of America Corp (BAC.N) was third at 3.06 percent, then followed by Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N), the study showed.
Goldman Sachs, Morgan Stanley and Bank of America declined to comment on the study. The other banks did not immediately react to requests for comment.
The OFR was set up after the 2007-09 credit meltdown to help regulators map financial markets.
The office has the power to retrieve bank data, including through subpoenas. It has a large degree of independence, and is funded by money levied from banks.
In 2013, it spotted risks in asset management in a report mandated by the Financial Stability Oversight Council, a group of the heads of the main U.S. regulatory agencies. The asset management report triggered attacks by the industry, which fiercely opposed any move toward tougher rules.
The latest study looked at 33 U.S. banks with assets over $50 billion. At that size, such banks are deemed “systemically important” and are subject to tighter rules. The eight largest banks in the group need to meet even tougher standards.
But size was not the only determining factor in measuring the risk in these banks, the study said.
“Several of the largest banks scored high in systemic importance because they dominate specific businesses, such as payments and asset custody services,” the study said. “Others scored high in complexity because of their trading and derivatives businesses.”
(Reporting by Douwe Miedema; Editing by Lisa Shumaker and David Gregorio)
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