JPMorgan Chase, Bank of America, and Citibank have been revealed to be holding trillions of dollars in undisclosed and potentially risky assets, according to recent data from the US government. The Federal Financial Institutions Examination Council (FFIEC) compiled the numbers, which were first reported by Wall Street on Parade. The data shows that JPMorgan Chase has $3.227 trillion off-balance sheet, Bank of America has $1.6 trillion off-balance sheet, and Citibank has $2.6 trillion off-balance sheet.

According to the Federal Reserve, off-balance sheet activities encompass a wide range of instruments, including firm loan commitments, standby letters of credit, foreign exchange, financial futures, forward contracts, options, interest rate swap contracts, and other derivative products. This practice of off-balance sheet accounting has been prevalent in the banking industry for many years and played a significant role in the 2008 financial crisis.

Citigroup, in particular, held significant assets off its balance sheet to minimize capital requirements. If these assets had been included, the leverage in 2007 would have been 48:1, which is about 53% higher. As a result, Citigroup suffered a major collapse in 2008 and received the largest bailouts in global banking history. By March 2009, its stock was trading at a mere 99 cents.

In July of last year, the Federal Reserve proposed higher capital requirements for banks to ensure their balance sheets are more resilient during economic downturns. However, CEOs from major banks, including JPMorgan Chase, Wells Fargo, Bank of America, Citigroup, Morgan Stanley, Goldman Sachs, BNY Mellon, and State Street, argued against these changes in a Senate Banking Oversight Committee hearing in December.

JPMorgan Chase CEO Jamie Dimon, in a prepared statement, claimed that the proposed changes would harm the banking industry and the overall economy. He stated that there is no evidence that large US banks are undercapitalized currently, and the proposed Basel III Endgame rule would unjustifiably increase capital requirements by 20-25% for the largest banks. Dimon believes that these changes would limit banks’ ability to deploy capital when it is most needed and have negative consequences for the economy, markets, businesses, and American households.

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