Discuss the courses of action that JPMorgan can take to maintain profitability that JPMorgan might loss...

Discuss the courses of action that JPMorgan can take to maintain profitability that JPMorgan might loss due to the Volcker Rule

Expert Solution

The Volcker Rule prevents banks from using customer deposits for the purpose of making profit for the entity. The banks, in other words, are not allowed to invest in PE (private equity) funds, hedge funds, and other trading operations. Thus the rule limits proprietary trading by banks with the objective of controlling their levels of risk exposure.

To maintain profitability JP Morgan has continuously restructured its business. During the period of financial crisis JP Morgan’s proprietary trading was a significant source of income. After the 2008 financial crisis the company restructured its business so as to reduce its reliance to generate income and profitability from proprietary trading.

JP Morgan can, going forward, focus more on executing client transactions. This will enable them to increase their earnings from commissions earned from client trades. It can also trade in currencies in the spot market and day to day trading. Lastly JP Morgan can take large positions in safer markets and trades.

jeff jeffy answered 1 year ago

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