Banking StandardsWritten evidence from JP Morgan Chase & Co.

1. What are JPM’s defining values and principles; how are these embedded through the organization and impressed upon its workforce;and how has JPM’s approach to instilling its values through the organization changed since the 2008 financial crisis?

Since the 2008 financial crisis we have placed renewed emphasis on our defining values and principles throughout the firm. For example, attached in Appendix 11 are our business principles, which are readily available on our internal website and which all employees—especially new hires—are encouraged not only to read but to keep nearby and reference often. An excerpt from a statement by J.P.Morgan Jr. before the Sub Committee of the Committee on Banking and Currency of the US Senate on 23 May 1933 appears at the end explaining what it means to do “first-class business in a first class way”. This enduring business principle is embedded in our heritage, and the senior leaders of the firm emphasize it and live it every day. Attached as Appendix 2 are our attributes of leadership which form a core part of the teaching to our managers through training programs. Finally, our Code of Conduct appears prominently on our internal website, and all employees are required to affirm each year that they have read, understand and are in compliance with the Code.

2. How did the mergers of J.P. Morgan with Chase Manhattan in 2000, and with Bank One in 2004, influence the culture and values of the organization? To what extent was there a clash of cultures, and how was this reconciled?

Throughout the evolution of J.P. Morgan Chase, mergers have always led to both an opportunity and a challenge to meld the cultures of the resulting organization and achieve the best both have to offer. In each case, there has been a focus on clients, collaborating across businesses and building a high performance culture within the firm. The CEO and his leadership teams have emphasized these themes repeatedly through innumerable town hall sessions, written communications and broadcasts to all employees, leadership training programs in which tens of thousands of employees have participated, investor presentations and annual report chairman letters. We have had more than a decade’s worth of experience in putting together large mergers and acquisitions. Our attitude has always been to pick the best people, systems and strategies. None of that has been easy but the most important part of all has been not to wait to make tough decisions. Delays in integrating people, systems and strategies can prolong the establishment of a unifying culture.

3. To what extent do you believe JPM’s reputation enables it to command higher fees from clients? Do you believe this reputationaladvantage,if it exists, derives from the values set out in answer to Question 1?

Fees in our main business lines are predominantly set by competitive market forces. Accordingly, we do not believe our reputation per se allows us to command higher fees. We believe the values discussed in Question 1 are a foundation of our reputation. And we believe our reputation for focusing on clients, integrity, strong execution capabilities and innovative thinking allows us to attract business and to be a leading firm in all of our key business lines. It is worth observing that some business lines such as a high net worth wealth management do command premium pricing because of the services offered and it is critical to have a strong reputation in order to be competitive in that business.

4. Do you believe there were distinctive elements of JPM’s culture and corporate governance arrangements that enabled it to weather the financial crisis better than its competitors? If so, what were these?

We strive to implement a culture and governance structure designed to identify, assess and escalate material business and risk issues so that they can be addressed expeditiously. There is no one structure or set of structures demonstrably superior in all circumstances. All of our business line CEOs, their key reports and senior risk and finance colleagues meet regularly to review key developments and to establish appropriate actions and strategies. The CEO provides leadership on all such matters through daily discussions, monthly business reviews and a firm-wide Risk Committee. Throughout the crisis itself, all senior business heads, risk and finance leaders met with the CEO three times per day. Having a strategy focused on supporting clients and investing in our businesses through all types of economic and financial environments, including highly stressed periods, means that we establish and maintain a fortress balance sheet based on strong capital and liquidity and conservative accounting. The combination of our fortress balance and risk management practice allowed us to weather the storm of the financial crisis.

5. What key factors determine JPM’s risk appetite and tolerance levels? How does the Board monitor the effective implementation of the risk appetite? How have the structure, activities and remuneration of JPM’s risk management and control operations changed since the 2008 financial crisis?

The firm’s risk appetite policy lays out the framework by which its risk appetite is established, reviewed, approved, monitored and managed. The framework integrates return targets, risk metrics and capital management to set the firm’s risk appetite in the context of its objectives for all stakeholders, including shareholders, depositors, regulators and customers. Each line of business is required to establish a risk appetite net income loss tolerance, return targets and limits on other relevant risk parameters, which must be approved by a combination of the firm CEO, CFO and CRO and reviewed at least quarterly by its risk committee. An overall firm-wide net income loss tolerance is established by the CEO and reviewed at least annually with the firm’s Operating Committee. The firm-wide net income loss tolerance is based on the firm’s adverse stress scenario (created as part of compliance with Dodd-Frank and the Federal Reserve’s Comprehensive Capital Adequacy Review). Firm-wide market risk and minimum liquidity tolerances also are established and updated at least annually. There is an escalation process for notifying the CEO and CRO of results exceeding risk appetite tolerances.

The Risk Policy Committee of the Board is responsible for approving the firm’s risk appetite policy on behalf of the Board of Directors, and for reviewing actual or forecast results exceeding risk appetite tolerances. The Risk Policy Committee receives periodic reports and updates to facilitate this process.

Since the financial crisis we have made a number of enhancements to our risk management and control processes, including but not limited to the following:

The Risk Management organization was changed to be independent of the lines of business.

Established a senior Firm-wide Risk Committee to address cross-business risk issues and to be an escalation point for lines of business risk committees.

Established and evolved the firm’s risk appetite statement and methodology.

Enhanced the market risk stress framework.

Expanded the scope of the model review and approval policy and established a complimentary model governance group to oversee model use.

Established senior risk roles with the mandate to look across the firm and review for consistency including market risk, wholesale credit risk, consumer credit risk and reputation risk.

Established a Firm-wide Oversight and Control Group, as well as control officer roles in each line of business and corporate function, to anticipate, detect and escalate control issues.

Expanded Country Risk Management from focusing exclusively on emerging market countries to include developed countries.

Please also see the answer to Question 6 below.

6. What failings of oversight and controls enabled the “London Whale” trading loss to occur? What changes has JPM made to its corporate governance as a result?

Following disclosure by the firm on May 10,2012 that its Chief Investment Office (CIO) had incurred significant mark-to-market losses in its synthetic credit portfolio, the firm established a Task Force, led by Michael Cavanagh, currently co-Chief Executive Officer of the Corporate and Investment Bank, with the assistance of outside counsel, to review and assess the circumstances surrounding the CIO losses. The firm’s Board of Directors in May 2012 formed an independent Board Review Committee to oversee the scope and work of the Management Task Force review, assess risk management processes related to the issues raised in the Management Task Force review,and report to the Board of Directors on the Review Committee’s findings and recommendations.

On 16 January 2013, the firm announced that the Management Task Force and the independent Board Review Committee had each concluded their reviews relating to the 2012 CIO losses and had released their respective reports.2

The Management Task Force summarizes the key events and sets forth its observations regarding the lapses in oversight and controls that contributed to the losses incurred by the CIO. Among the failings of oversight and controls identified by the Task Force were: the firm did not ensure that the controls and oversight of CIO evolved commensurately with the increased complexity and risk of CIO’s activities in the first quarter of 2012;CIO risk management lacked the personnel and structure necessary to manage the risks of the synthetic credit portfolio; CIO’s risk limits were not sufficiently granular; and the approval and implementation during the first quarter of 2012 of the CIO VaR model related to the synthetic credit portfolio had been inadequate.

The Management Task Force report also describes the broad range of remedial actions taken by the firm to respond to the lessons it has learned from the CIO events, including:

revamping the governance, mandate and reporting and control processes of CIO;

implementing numerous risk management changes, including improvements in model governance and market risk; and

implementing a series of changes to the Risk function’s governance, organizational structure and interaction with the Board.

The full text of the Management Task Force Report can be accessed on the Firm’s website at:

http://files.shareholder.com/downloads/ONE/2255849611x0x628656/4cb574a0–0bf5-

4728–9582–625e4519b5ab/Task Force Report.pdf

The Board Review Committee Report also recommended a number of enhancements to the Board’s own practice to strengthen its oversight of the Firm’s risk management processes. The Board Review Committee noted that some of its recommendations were already being followed by the Board or its Risk Policy Committee or had recently been put into effect. The Board Review Committee’s recommendations included:

better focused and clearer reporting of presentations to the Board’s Risk Policy Committee,with particular emphasis on the key risks for each line of business, identification of significant future changes to the business and its risk profile, and adequacy of staffing, technology and other resources;

clarifying to management the Board’s expectations regarding the capabilities, stature, and independence of the firm’s risk management personnel;

more systematic reporting to the Risk Policy Committee on significant model risk, model approval and model governance, on setting of significant risk limits and responses to significant limit excessions, and with respect to regulatory matters requiring attention;

further clarification of the Risk Policy Committee’s role and responsibilities, and more coordination of matters presented to the Risk Policy Committee and the Audit Committee;

concurrence by the Risk Policy Committee in the hiring or firing of the Chief Risk Officer and that it be consulted with respect to the setting of such Chief Risk Officer’s compensation; and

staff with appropriate risk expertise be added to the firm’s Internal Audit function and that Internal Audit more systematically include the risk management function in its audits.

The full text of the Board of Review Committee Report can be accessed on the firm’s website at: http://files.shareholder.com/downloads/ONE/2255849611x0x628655/752f9610-b815-428c-8b22-d35d936e2ed8/Board Review Committee Report.pdf

The Board of Directors will continue to oversee the remediation efforts to see that they are fully implemented.

7. Would you characterise the US retail banking markets as more competitive than the UK equivalent? Has JPM considered undertaking retail operations in the UK?

As a general matter, the US banking market is less concentrated and represents a smaller percentage of Gross Domestic Product than other developed countries, including the United Kingdom. (Please see Appendix 3 which is a slide produced by the US Treasury Department. )The US retail banking market in particular is more competitive than the United Kingdom’s. The Riegle-Neal Act of 1994 prohibits bank acquisitions if the resulting institution will have insured deposits greater than 10% in the nation or 30% in any one state. This, along with other regulations, has led the US banking market to be materially more fragmented than the United Kingdom’s: on a per capita basis,the United States has -3.5x the bank institutions and over 2.5x the bank branches the United Kingdom has. For each million citizens, the United States has -20 banks and -300 branches, while the United Kingdom has 5 banks and -125 branches.

Retail banks in the United States have limited pricing power and offer a relatively standard set of products. As a result, they differentiate their offering in other ways.

One of the chief dimensions of competition is convenience, which has driven the proliferation of branches and ATMs that make US consumers more heavily branched per capita. Even among the theme of convenience, some of the largest retail banks place varying emphasis on sub-themes, including location convenience, their online platforms, their in-branch features (eg free coin counters), mobile apps and other convenience features.

We note that there has been a lot of focus in the United Kingdom on the difficulty of switching accounts, as discussed in the Vickers Report. This is not a material consumer complaint in the United States. In fact, many popular services (eg online bill-pay) are considered drivers of relationship “stickiness”.

We have not considered undertaking retail banking operations in the United Kingdom.

8. Does the existence of non-bank “alternative” providers of finance in the US have a meaningful influence on levels of competition in the retail market? What other factors does JPM believe contribute, either positively or negatively, to the competitiveness of the US retail market?

Two types of alternative financial services have recently evolved in the United States. One example is storefront and online lenders who are addressing short-term liquidity needs of customers who they believe are underserved by banks but with exceptionally high interest rates. A second is retailers (in partnership with third-party specialist providers) who offer money transfer agent services which look and feel like deposit taking, sometimes without being FDIC-insured. Alternative payments providers such as Google Wallet, Paypal and others offer new technologies which reduce or eliminate friction from the overall shopping experience.

In response to these developments, traditional retail banks are taking the best ideas and improving upon them. For example, we have launched Chase Liquid, generally considered to be best-in-class prepaid card to give consumers a prepaid option with the full service and protections afforded by a regulated banking institution.

The new Consumer Finance Protection Bureau, created by Dodd-Frank, is bringing renewed focus to the consumer protection aspects of these developments. Their mandate includes focusing on disclosures, standardization, privacy and pricing issues. Ensuring a fair and competitive marketplace, which includes traditional banks and alternative service providers subject to comparable rules and standards, ultimately will further improve the quality of consumer financial services in the United States.

9. What advantages does JPM believe it derives from operating as a combined global investment bank and a US retail bank? How does JPM ensure that the scale and breadth of its operations does not compromise its values and governance?

The affiliation of the firm’s global investment banks and its US retail bank provide substantial benefits, including lower volatility of revenues, sustained investments and cost synergies.

Lower volatility of revenues and sustained investments

The combination of retail and global investment bank franchises leads to lower volatility of top line revenues when compared to mono-line competitors. From 2009–2012,JPM’s total revenue volatility was lower than a sample11 of US retail banks (20% and 33%, respectively). This was achieved thanks to a balanced portfolio of Net Interest Income versus fee income revenue sources, and a balanced wholesale versus retail revenue stream. We have seen that wholesale and retail revenues have behaved differently to changes in important variables such as interest rates, volatility, disposable income and GOP, among others. As a result, JPM has maintained positive net income throughout and since the financial crisis.

The combination of retail and investment bank lines of business also affords larger scale to sustain investments through cyclical downturns. During 2007–2010,we continued investing in our businesses while maintaining a fortress balance sheet, which allowed us to capture market share as mono-line firms cut investments.

Cost Synergies

The combination of retail and investment bank franchises allows JPM to generate significant cost synergies it would not be able to achieve otherwise. The firm recently reported annual savings in excess of “$3 billion (firm wide) that result from being able to spread significant technological investments among a broader client base, and from achieving significant cost savings due to “volume discounts” in key areas such as Technology, Communications, Real Estate, among others.

10. As a place to do business, what are the main differences between London and New York, and what factors influence how JPM allocates its business between the two cities? What are the key risks, if any, to London retaining its status as one of the world’s preeminent financial centres?

JPM’s origins go back to the London of the 1830’s and we have had a strong presence ever since.

London’s stable regulatory, fiscal and political environments have always been important factors in attracting international financial businesses. The robustness, independence and commercial focus of the English legal system and the rule of law; the proximity of other related business services such as accountants, auditors and consultants; the English language; time-zone and geographic location in between the East and West; availability of talented employees have all been key factors in this attraction.

Notwithstanding the changed political and public mood towards the industry in the last five years, London arguably still presents advantages over other financial centers in the region. It is clear that the current government is not complacent about what is needed to sustain the UK’s position as a leader in financial services and to remain competitive. There are challenges, however, and businesses owe it to their shareholders and employees constantly to keep under review where they invest and locate.

In London, corporation tax is coming down, although the bank levy has gone up. Personal taxation (a factor that is relevant when we ask people to relocate to London), is going down but still remains higher than some other international financial centers. European Union rules on bank bonuses could significantly impact our ability to attract and retain senior people from outside the EU to run parts of our business in and from the UK. The UK has successfully ensured that new EU Banking Union structures do not restrict its access to the EU single market. However, the Prime Minister’s recent speech on UK membership of the European Union inevitably will raise questions for inward investors over the next few years, despite his expressed wish that the UK remain in the EU.

JPM’s London office is the headquarters for the Europe, Middle East and Africa region. From London we conduct business across the EU and our offices in Europe’s major capitals are a mix of branches of our London bank and of our US bank- and we value the flexibility London offers as a platform for access to the single market in a variety of formats. Our trading activity in London benefits from an EU passport across the EU. London’s location and role as a financial center also make it a sensible location from which we oversee activity in Russia, the Middle East, and Africa.

London’s regional and global strength—not least in terms of human capital—in foreign exchange, derivative, bond, equity and commodities markets also make it an obvious place from which to run some of those businesses, although the mobility of especially that human capital should not be underestimated and much of that activity could take place from other locations equally well, in the event of a relative diminution in London’s attractiveness.

11. Do you agree with the opinion, expressed in some quarters, that a regulatory “race to the top” is underway, with authorities competing to raise, rather than lower, standards and sanctions? Do you think this is a good thing?

We do agree that to some extent there is a “race to the top” in terms of new standards and sanctions. Prime examples of this include capital and liquidity rules where some countries are going considerably beyond internationally-agreed minimum standards. As a general matter, strong standards and sanctions bolster safety and soundness and financial stability. However, it is important to recognize the global nature of banking and finance today and that vastly different standards and sanctions can have significant impacts on the competitive landscape and, by extension, where, how and by whom credit is channeled in the economy. Regulatory authorities should be mindful that racing to the top could actually reduce competition in some sectors if firms are unable to cope with escalating standards; lead to some activity being conducted outside of the traditionally regulated firms, making it potentially more difficult to address imbalances or stressed market conditions; and adversely affect consumers of financial services through restricted product and service availability and higher prices. It also is worth observing that racing to the top can lead to government decision-making through the imposition of regulatory standards replacing firms’ judgment and economic decision making. The risk of such a trend is a reduction in the efficient allocation of resources in the financial system and the economy.

12. Does JPM anticipate that differences in the implementation of global regulations (eg Basel Ill) at a national level, and “super-equivalence” and “front-running” in certain jurisdictions, will provide significant opportunities for regulatory arbitrage in the future?

Differences in regulatory regimes can adversely affect the competitive landscape and spawn arbitrage opportunities. The extent to which this happens is a function of the specifics of the final rules, how they are implemented and how the market perceives them. To understand this in the context of regulatory capital, for example, it is important to ensure rules and impacts are fully comparable. Consider that Jurisdiction A might have a nominally higher capital requirement than Jurisdiction B, but Jurisdiction A might make certain exemptions or modify methodologies such that its requirement is actually less conservative than Jurisdiction B’s. Of particular concern is where the measurement of exposure in a particular activity or asset class differs significantly across jurisdictions, leading to unequal capitalization of the ultimate risk even though overall calibration levels might be comparable. A prime example are the market risk capital requirements for derivatives in CRD IV which appear to exempt exposures to corporate counterparties, sovereigns and pension funds from the requirements in contrast to Basel and US rules.

If regulatory capital methodologies are fully consistent then it is possible that the market will compel all banks to achieve at least the highest level of capital under the proposed regime even though some banks technically would have a lower requirement (eg because they have a lower capital surcharge based on their relative global systemic importance ). The market may perceive the highest level to be prudent and reasonable and therefore any bank operating below such a requirement would be considered less credible. To the extent a national authority goes considerably beyond what the market perceives as necessary to operate in a prudent manner, unduly tying up scarce capital resources, it is possible that banks not subject to such super-equivalence could benefit by operating at lower levels of capital, gain market share and achieve higher levels of return. The ultimate impacts remain to be seen as Basel Ill is finalized and implemented in each jurisdiction.

13. What changes has JPM made, or planned to make, to its business in preparation for the “Volcker Rule”? Has this caused JPM any difficulties? How, if at all, has it affected JPM’s business in London?

The “Volcker Rule” is currently being considered as a regulation by multiple U.S. regulators. Given the complexity of the proposal, the numerous possible approaches proffered therein, and the number and variation of comments provided to the regulators, we at this time do not know what the content of any final rule will be, or even whether there will be one or multiple final rules. As such, while we made substantial efforts to study the potential effect of the proposed rule on our businesses, we have taken only limited steps towards implementation. Since the inclusion of the Volcker Rule in Dodd-Frank, JPM and other firms essentially have eliminated pure proprietary trading activities. Our greatest concern with the proposed rule was the difficulty of distinguishing valid market making activity- which requires putting principal at risk- from impermissible proprietary trading, and we have no further insights. In the funds area, we have begun taking steps to discontinue investment in certain funds, and limit our own investment in covered funds along the lines of the proposed rule.

8 March 2013

Appendix 1 not printed.

APPENDIX 2

JPMC Attributes of a Leader
People Leadership	Business Execution	Partnership	Client/Customer Focus
Sets High Standards    Exemplifies the highest standard of ethics and integrity    Sets a high performance benchmark for team    Proactively takes initiative, even if outside of his/her area of responsibility    Demonstrates a strong work ethic	Discipline    Conducts regular and thorough business review of function    Uses well-organized processes to manage business and solve issues    Maintains a strong system of internalgovernance and controls    Creates efficiencies, reduces costs while maintaining a strong balance sheet focus.	Fosters Openness & Teamwork    Puts loyalty to the institution ahead of personalagenda Collaborates effectively across boundaries, levels and functions to solve issues in a productive manner    Acts as if colleagues priorities are his/her own    Encourages people to say what is on their mind	Sets Things up for Success    Builds a client and service centered organization    Creates a nimble, efficient structure for managing the business and making decisions    Seeks out and listens to customer’s clients view to proactively address concerns Builds teams that succeed by assessing the deliverable and aligning team members with the appropriate skills
Treats All People Right and with Respect    Treats people with respect regardless of their level or role Exports talent to develop people and meet firm needs    Helps people navigate their careers at the firm Champions and personally engages in diversity initiatives to create an inclusive environment	Fortitude    Demonstrates determination, resilience and tenacity    Eliminates bureaucracy or activity that does not add value    Executes with appropriate sense of urgency	Has RealHumanity    Shares recognition with others    Shows compassion when an employee is struggling    Celebrates team success and owns team failures    Acknowledges that it requires a team to be successful	Drives Innovation    Challenges the status quo/traditional way of doing things    Applies fresh, innovative thinking to drive better client/customer experience    Drives change by hetping others to overcome their resistance/concern
Manages Performance    Provides honest and direct feedback on a consistent basis Judges performance in an objective way    Makes people decisions based on meritocracy    Removes obstacles in order to facilitate team’s success	Faces Facts    Deals with the facts, regardless of how bad they may be    Raises difficult issues and problems in a timely manner    Is open and transparent by disclosing key facts and information		Strategic thinking    Applies a global perspective in establishing direction for team    Strategic thinker with respect to industry trends and how best to drive in the market    Communicates with clarity of thought and focus

JP Morgan Chase & Co

APPENDIX 3

A CONSOLIDATING BANKING INDUSTRY

However, the United States is among the least concentrated banking system of any major economy and among the smallest banking system relative to the size of its economy.