Part I An economic downturn that results in lower consumer and business spending could also have a negative impact on certain of JPMorgan Chase’s wholesale clients, and thereby diminish JPMorgan Chase’s earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase’s wholesale clients are dependent on consistent streams of rental income from commercial real estate properties which are owned or being built by those clients. Severe and sustained adverse economic conditions, including higher unemployment caused by the COVID-19 pandemic and governmental actions taken in response to the pandemic, could result in reductions in the rental cash flows that owners or developers receive from their tenants which, in turn, could depress the values of the properties and impair the ability of borrowers to service or refinance their commercial real estate loans. These consequences could result in JPMorgan Chase experiencing higher delinquencies, defaults and write-offs within its commercial real estate loan portfolio and incurring higher costs for servicing a larger volume of delinquent loans in that portfolio, thereby reducing JPMorgan Chase’s earnings from its wholesale businesses. In general, a low or negative interest rate environment may cause: All of these outcomes could adversely affect JPMorgan Chase’s revenues and its liquidity and capital levels. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase’s consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. The value of securities, derivatives and other financial instruments which JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value certain financial instruments. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of JPMorgan Chase’s financial instruments which may have an adverse effect on JPMorgan Chase’s results of operations. When credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase’s credit spreads may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase’s credit spreads will affect, positively or negatively, JPMorgan Chase’s earnings on certain liabilities, such as derivatives, that are recorded at fair value. When interest rates are increasing, JPMorgan Chase can generally be expected to earn higher net interest income. However, higher interest rates can also lead to: JPMorgan Chase’s risk management and monitoring processes, including its stress testing framework, seek to quantify and control JPMorgan Chase’s exposure to more extreme market moves. However, JPMorgan Chase’s hedging and other risk management strategies may not be effective, and it could incur significant losses, if extreme market events were to occur. 16 • a reduction in the value of JPMorgan Chase’s mortgage servicing rights (“MSRs”) asset, thereby decreasing revenues. • JPMorgan Chase to reduce the amount of deposits that it accepts from customers and clients, which could result in lower revenues, and • unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase’s broader asset and liability management strategy • net interest margins to be compressed, which could reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments • higher funding costs. • less liquidity in the financial markets, and • lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings • the loss of deposits, including in the event that JPMorgan Chase makes incorrect assumptions about depositor behavior • losses on underwriting exposures • fewer originations of commercial and residential real estate loans Changes in interest rates and credit spreads can adversely affect certain of JPMorgan Chase’s revenue and income streams related to the Firm’s traditional banking and funding activities. JPMorgan Chase’s results may be materially affected by market fluctuations and significant changes in the value of financial instruments.