Regulation as a Wall and a TaxNarrow moat

JPMorgan Chase (JPM) — moat facet

You cannot start one of these -- and the price of that protection is a capital requirement, a stress test and a surcharge all written by somebody else.

Most moats in this collection were built. This one was largely imposed, which makes it unusually durable and unusually uncomfortable to own.

CET1 ratio against requirement11.5%Required incl. buffers14.6%Actual, end-202514.1%Actual, Jun 2026Three points of surplus on ~$2tn of RWA is roughly $60bn of equity held in reserve.
A moat that was imposed rather than built - and belongs to whoever writes the rule.

A US global systemically important bank operates under a charter, a capital surcharge, an annual supervisory stress test, a resolution plan, a liquidity coverage requirement and a leverage constraint. JPMorgan's Standardized common equity Tier 1 requirement, including all regulatory buffers, was 11.5% at the end of 20251; its actual ratio was 14.6%2. Its stress capital buffer is 2.5% and runs through September 20273.

Read one way that is a burden, and it is. Read another, it is the most effective barrier to entry in finance. No amount of venture capital produces a national bank charter, a Federal Reserve account and a deposit-insurance relationship. The firms that compete hardest with JPMorgan mostly do so by arranging not to be banks.

Which is where the discomfort sits. JPMorgan's own risk factors warn that advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions4, and that new entrants continue to emerge, including non-financial companies offering products that disintermediate traditional banking5. The wall keeps out anyone who wants to be a bank. It does nothing about firms that want the business without the charter.

The other cost is that the rules change. The Basel III endgame proposal of July 2023 was never finalised, and in September 2025 the Federal Reserve signalled a replacement proposal in early 20266 — the capital requirement, and therefore the return, remains someone else's decision.

The number that tests this is the gap between the actual CET1 ratio and the required one. Three points of surplus is the price of not knowing what the rule will be.

Moat trajectory: Holding steady

The requirement has not changed and the replacement has not been written. The Basel III endgame proposal from July 2023 was never finalised, and in September 2025 the Federal Reserve signalled a revised proposal for early 2026 — so the single input that most determines what this bank can earn remains open.

The number that tests this moat
Reported
CET1 ratio against the requirement
14.6% vs 11.5% required

On $288bn of common equity Tier 1 capital at end-2025, including a stress capital buffer at its 2.5% floor. Three points of surplus on roughly $2 trillion of risk-weighted assets is about $60bn of equity held against a rule that has not been written. Watch the gap — it narrowed half a point in six months.

Source: JPMorgan Chase Form 10-K, FY2025 ↗
Aspects of the moat
DIG DEEPER 01
Fourteen Point Six Against Eleven Point Five
Three points of surplus capital earn nothing for years and then earn several billion dollars in a weekend, which is the whole case for carrying them.
DIG DEEPER 02
The Stress Test Sets the Dividend
A model the bank cannot inspect decides how much of its own earnings it may return, which is how regulation converts directly into cash flow.
DIG DEEPER 03
The Surcharge for Being Systemically Important
The firm is taxed in proportion to the thing that makes it valuable, which caps the return rather than the size.
DIG DEEPER 04
First Republic: What the Charter Is Worth in a Crisis
A 2.8 billion dollar bargain purchase gain is what a fortress balance sheet earns on the two or three weekends a generation when it is the only…
⚠ Threats to the moat
⚠ THREAT 01
The Rules Are Written by People Who Change
A moat built out of regulation belongs to whoever writes the regulation, and the current proposal has not been written yet.
⚠ THREAT 02
The Competition Is Arranging Not to Be a Bank
The wall keeps out everyone who wants to be a bank and does nothing about the firms that want the business without the charter.
References
  1. ReportedBasel III CET1 capital of $288bn, a Standardized ratio of 14.6%, against a requirement including all regulatory buffers of 11.5%.
    JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
  2. ReportedBasel III CET1 capital of $288bn, a Standardized ratio of 14.6%, against a requirement including all regulatory buffers of 11.5%.
    JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
  3. ReportedThe stress capital buffer is 2.5%, in effect through 30 September 2027, with the annual capital plan submission due 6 April 2026.
    JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
  4. ReportedThe 10-K warns that advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions.
    JPMorgan Chase & Co., Form 10-K FY2025 — risk factors and competition (SEC, CIK 19617). 'Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other internet-based companies, digital asset and other financial technology companies.' 'New competitors in the financial services industry continue to emerge, including firms that offer products and services solely through the internet and non-financial companies that offer products and services that disintermediate traditional banking products and services offered by financial services firms such as JPMorganChase.' The risk factors further warn that advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions; that if the firm does not keep pace with rapidly changing technological advances, including the adoption of generative AI, it risks losing clients and market share, with competition intensified as the feasibility, capability and scalability of new technologies improves; that adverse macroeconomic or market conditions could prompt outflows from funds or accounts or cause clients to invest in products that generate lower revenue; and that the interconnectivity across credit markets increases the risk that the significant expansion of private credit could worsen losses among non-bank lenders and their borrowers, particularly if stress or defaults spread to broader funding and credit markets. — FY2025 · publ. 2026-02-13 · source ↗
  5. ReportedThe 10-K notes that new competitors continue to emerge, including firms operating solely through the internet and non-financial companies offering products that disintermediate traditional banking products and services.
    JPMorgan Chase & Co., Form 10-K FY2025 — risk factors and competition (SEC, CIK 19617). 'Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other internet-based companies, digital asset and other financial technology companies.' 'New competitors in the financial services industry continue to emerge, including firms that offer products and services solely through the internet and non-financial companies that offer products and services that disintermediate traditional banking products and services offered by financial services firms such as JPMorganChase.' The risk factors further warn that advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions; that if the firm does not keep pace with rapidly changing technological advances, including the adoption of generative AI, it risks losing clients and market share, with competition intensified as the feasibility, capability and scalability of new technologies improves; that adverse macroeconomic or market conditions could prompt outflows from funds or accounts or cause clients to invest in products that generate lower revenue; and that the interconnectivity across credit markets increases the risk that the significant expansion of private credit could worsen losses among non-bank lenders and their borrowers, particularly if stress or defaults spread to broader funding and credit markets. — FY2025 · publ. 2026-02-13 · source ↗
  6. ReportedThe July 2023 Basel III endgame proposal was never finalised; in September 2025 the Federal Reserve signalled an updated proposal for early 2026, the timing and content of which remain uncertain.
    JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
Sources
Generated September 23, 2026