JPMorgan Has About $100 Billion of Notional GIIPS Derivatives

JPMorgan Chase & Co., the biggest derivatives dealer among U.S. banks, has bought and sold notional credit derivatives on about $100 billion of sovereign and non-sovereign debt in the five troubled European nations, Chief Executive Officer Jamie Dimon said today.

The bank had about $13.9 billion of mark-to-market derivative exposure as of Nov. 17, offset by $6.3 billion of collateral, Dimon said at an investor conference in New York. JPMorgan would likely have a direct loss of about $3 billion if a “disaster” occurred in the region’s debt crisis, he said.

“I get asked the question with derivatives of $14 billion, people say ‘my God, that’s your net because you have huge long and short,’ and we do. It’s maybe $100 billion by $100 billion, I forgot the exact number,” Dimon said.

The disclosure is the first by a major U.S. bank regarding the notional derivatives it bought and sold on the region as investors seek to judge banks’ risks linked to the European debt crisis. Banks provide their global notional credit derivatives bought and sold, and have begun providing net exposure figures to Greece, Italy, Ireland, Portugal and Spain, sometimes called the GIIPS.

Dimon said the bank doesn’t net its derivative exposure across counterparties, so it would not sell protection on Italian debt to one bank and buy credit-default swaps on Italian debt from another and consider those exposures offsetting.

“The default of a counterparty is not going to sink our hedges,” Dimon said. “We don’t have a lot of wrong-way risk.”


Credit derivatives counterparties are primarily outside the GIIPS and are either investment-grade or are supported by collateral arrangements, according to a presentation from the bank. Dimon also said all the firm’s hedging was done with counterparties outside the five countries.

As of Sept. 30, JPMorgan said worldwide it had sold $3.13 trillion of credit-derivative protection and purchased $3.07 trillion, up from $2.75 trillion sold and $2.72 trillion bought at the end of 2010, filings show. The firm was the largest dealer of credit derivatives among U.S. banks in the second quarter, according to data from the Office of the Comptroller of the Currency.

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