JPMorgan Chasebegan scrutinizing the financial strength and business models of many of its broker-dealer clients six months ago, in reaction to new rules being put in place under the Dodd-Frank financial reform law. \( Read more: Mysterious Happenings at JPMorgan? \)
The rules, which have been proposed by banking regulators but are not yet effective, require banks to require customers of “uncleared” swaps products to post initial margin funds, as well as additional funds if the market moves against them.
Swaps are considered uncleared under the regulations if they are not traded through a nationally recognized clearing house.
JPMorgan’s review is aimed at identifying clients that may have difficulty meeting the new margin requirements, principally because they lack adequate capital and liquidity.
Some clients may find that the bank will scale back its relationship with them unless they increase their own access to capital. Others may be dumped entirely, according to a person familiar with the matter.
The review was first reported by "The Wall Street Journal," although the paper did not report the regulatory roots of the review.