1.0 still subject to external impact that

1.0  Introduction

Chase & Co, also goes by Chase, is a U.S. based national bank that mainly
composed of consumer, investment, and commercial sectors. Chase is built on the
foundation of more than 1200 predecessor institutions that have come together
through the years to form today’s company. It is one of the oldest financial
institutions in the United States with a history of more than 200 years. Now,
Chase is a leading global financial services firm with assets of 2.6 trillion
U.S. dollars, operates in more than 60 countries, and has over 240,000
employees worldwide. Chase market share is rated at 115 U.S. dollars for the
day this report is been composed. Even as massive as Chase with immense
influences across the global, companies are still subject to external impact
that will ultimately alter their policies and decision-making strategies. It is
crucial to analyze the importance of business environments, because environment,
sometimes poses threats and challenges to business. According to Rao (2009,
p.34), business should enhance its strength in order to face the challenges posed
by environment.

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1.0  Primary External Influences


Political factors play a very important role
in the banking and financial sectors of toady’s business world. Traditionally,
it is believed that banks, along with other business sectors, should be allowed
to have immense power and free will to act on their own based on the principle
of free market—demand and supply. However, without any regulations, there will
not only be the problem of maintaining the welfare of citizens, but national securities
as well. Addressed by Cherunilam (2010, p.14), some policy developments create
opportunities as well as threats. In other words, a development which brightens
the prospects of some enterprises may pose threats to some others. For example,
deregulation on banks during the Bush administration created financial crisis
and destroyed Lehman Brothers, but at the same time other remaining gigantic
investment banks, which were saved by the U.S. government, gained more
expansion opportunities after recovery.

especially since the inauguration of Trump, two of the six biggest banks,
JPMorgan Chase and Wells Fargo, could boast market capitalization that exceeded
the book value of their assets (The Economist, 2017). Moreover, banks are among
the leading repositories of the public’s
savings, according to Rose and Hudgins (2012, p.29), especially the savings of
individuals and families. While most of the public’s savings are placed in
relatively short-term, highly liquid deposits, banks also hold large amounts of
long-term savings in retirement accounts. The loss of these funds due to bank
failure or crime would be catastrophic to many individuals and families.
However, general citizens, the majority of the population, lack the knowledge
of financial operations or detailed information or data needed to correctly
forecast the potential risks of a bank or other financial-service providers.
Thus, regulatory agencies are necessary to determine whether adjustments need
to be made to cope with the current economic situation to ensure the safety and
stability of the country.

2.2 Economic Environment

Government plays a major role in the economy at
both national and local level and its activities help to influence both the
demand and supply side (Worthington and Britton, 2006). To ensure the economic
growth, governments need to have a specific and sophisticated economic plan
which determines future of the country. As a
country becomes more developed, one typically sees the capital markets playing
a greater role in supplying financial products and services relative to that
supplied by the banks. In many advanced economies, for example, raising
business debt through securities rivals or exceeds that provided though the
banking system (Hunt and Bollard, 2011).

Correctly and precisely analyze the current
economic trend helps Chase consider its general position and shape of the
market. For example, Chase failed in doing so which resulted in bad
performances. According to La Monica (2016), shares of JPMorgan Chase are down
12% since the start of January because of the prediction about China’s economy
slowing down and continued collapse in oil prices.

More importantly, banks and economy are interrelated. A growing economy
can be beneficial for banks, at the same time, a stable and healthy banking
system can help with the GDP increase. Bank industry is an essential
contributor to countries’ economic growth and well-being. Banks as leading
taxpayers, progressive employers and major purchasers of goods and services as
well as being good corporate citizens (Canadian Bank Association, 2017). Under
the influence of globalization, banks become more and more important.
Cooperation between banks all over the world help capitals transfer from one
country to another and contribute to the world’s economy growth. In
the 21srt century, banks have become important players in facilitating business
growth. They have emerged as critical partners for small and large businesses
helping them with loans, consumer transactions and several other things. These
banks are important partners for the individual economies. 

2.3 Technological Environment

In simple terms,
according to Hamilton and Webster(2015), technology refers to the know-how or
the pool of ideas of knowledge available to society. Development of technology,
since the late 20th century, has been the major force in changing and
shaping the way companies do business. The development of technology plays a
crucial role in today’s banking industry as well. It is crucial for the
competitive advantages and proves to be the core driver for globalization. For
example, the application of mobile payment which is widely accepted in China, forced
banks to rethink and adjust to this new technology and new customer behavior. The
giants of the banking world are starting to publicly acknowledge the dominance
of mobile payment devised by Chinese technology firms – and, more broadly, a
failure up with fintech rivals in certain areas (Ye, 2017). Also, personal
experiences prove that merchants around the world, who adopted the mobile
payment system, successfully attracted Chinese tourists and made tourists life
much easier, since there was no currency conversion involved in the process of

However, technology
generates uncertainty and insecurity. Rely too much on technology can sometimes
create inconvenience and chaos. Chase bank customers reported being unable to
access their bank account through either website or mobile application during the
Forth of July holiday 2017 (Radu, 2017). Customer were not able to check their
accounts or make transactions during that period of time, which could cause
potential business loss and lower customer satisfaction. Meanwhile, banks need
to spend significantly large amount of money for technological equipment and
software update and maintenance each year to make sure the privacy of customers’
information and safety of their money. However, with the advancement of
technology and innovation, privacy and security concerns have also become a
major problem that banks have to deal with. For example, a hack on Bangladesh
Bank in February resulted in the theft of $81 million, with fraudulent messages
pushed along Swift channels. Although it was the highest-profile attach via
Swift, Bangladesh Bank is not the only victim believed to have fallen victim to
the hacker (Long, 2016).


3.0 Task 2: Influences of Deregulations and Regulations on
Chase Bank and banking industry

3.1 Financial
crisis and subsequent regulations

are several causes for the occurrence of 2008 financial crisis which had a huge
impact on wall street and international financial and banking system. Explained
by Claessens and Kodres (IMF Working Paper, 2014), one cause stressed in most
accounts of the recent crisis is the occurrence of a credit boom or, more
generally, rapid financial expansion. In other words, greed is the main driver
of the crisis. The American economy is built on credit. When used correctly,
credit can be a great tool for economy growth. For example, credit can help entrepreneurs
start their own business, purchases materials for productions or even pay for
houses or cars as average consumers, which can all create jobs during the
process. However, when housing market did not reach what was anticipated, banks
faced the problem of not be able to collect what had been issued to their
customers. Behind this, is the financial liberalization and deregulation. It is
considered to be the step taken to remove barriers between investment and
commercial banking in the U.S. Without this barrier, banks, including Chase,
rapidly expanded their business. According to Baily, Bekker and Holmes (The
Brookings Institution, 2015), the assets and liabilities of the big four banks
grew very rapidly for the years prior to the financial crisis as a result of
deregulation, particularly through the Riegle-Neal Act in 1994, but also from
the Gramm-Leach-Bliley Act of 1999. The deregulation lead to the inevitable
situation that everything had to be relied on the internal risk management
models of banks. Claessens and Kodres(IMF Working Paper, 2014) also address
that risks, notably in the shadow banking system but also at large, internationally
active banks, were permitted to grow without much oversight, leading eventually
to both bank and nonbank financial instability.

2008, the financial crisis and the following recession badly damaged
substantial amount of international and local financial services firms.
Governments from the global tried their best to save banks from bankruptcy, and
both governments and public clamored against banks they deemed “too big to fail”
(Collis, 2016). Banks are now required to increase capital requirements,
improve transparency and accountability. In response, many financial
organization reduced their scale and reshaped portfolios. According to Duffie (2016),
because of Basel 3 accords the capital and liquidity cushions of the largest
financial institutions are significantly higher than pre-crisis levels. For
example, the six largest U.S. bank holding companies has increased their risk-weighted
assets from 7% to 12% during 2015. In Europe, the 15 largest EU banks had improved
the ratios from about 9.6% to 12.3%.

assets determine a bank’s minimum capital needs, thus increased risk-weighted
assets reduce potential probability of risk for the financial institution. Other
than increasing capital requirements, the balance-sheet liquidity of large
banks is now regulated to a minimum Liquidity Coverage Ratio (Duffie, 2016). This
is to make sure that cash outflows, which happened within 30 days, will be fully
backed up by cash sources, in other words, credit issuing is limited by the
amount of cash that the bank holds.

3.2 How
did JPMorgan Chase respond to and survive through the financial crisis

JPMorgan Chase, during the 2008 financial crisis, did
not suffer from a severe damage, rather it acquired Bear and Sterns by a relatively
low value per share price, of course backed up by U.S. government to ensure the
stability of financial markets and easy off any potential collapse of important
financial services firms. Chase, first of all, survived the financial by not
being too greedy: avoided subprime mortgages, structured investment vehicles
and collateralized debt obligations. Those financial products caused the most
of rapid credit boom during the years prior to the financial crisis. Thus, the
impact of the financial crisis on Chase was not as high as on other failed
banks, such as Bear and Stern and Lehman Brothers. Secondly, according to
Collis (2016), Chase, the largest bank in the U.S. by asset 2011, which had successful
weathered the financial crisis in part due to the benefit of diversification,
emerged with a “fortress balance sheet” and an improved position in the banking
league tables. It is Chase’s basic principle to create and maintain a “fortress
balance sheet”. A “fortress balance sheet” basically means to build a balance
sheet that can withstand potential risks. In other words, reduce risk to the
minimum during the business process. According to Annual Report 2009, after
2008 Chase maintained focus on risk management; high-quality capital; strong
loan loss reserves; honest, transparent reporting; and appropriately
conservative accounting (The Way Forward, 2009).