Rising interest rates through Fed tightening will directly affect JPMorgan in two ways. It will lower its capital base as its debt portfolio will lose value, and increase revenue generation by increasing the net interest income amount. One of the indirect effects that a rise in interest rise would have is that mortgage rates will increase as well. This will lead to lower mortgage loan applications, both new and refinanced. One of the requirements of Dodd-Frank Act is for banks to hold onto 17-21% of its risk-weighted assets as capital which should include long-term debt from banks’ creditors. This rule alone is estimated to decrease JPMorgan’s EPS by 4%.
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