Notes to consolidated financial statements J. P.  Morgan Chase & Co.  104 J. P.  Morgan Chase & Co.  / 2003 Annual Report Notes to consolidated financial statements J. P.  Morgan Chase & Co.  conduits.
Commercial paper issued by conduits for which the Firm acts as administrator aggregated $11.7 billion at December 31, 2003, and $17.5 billion at December 31, 2002.
The commercial paper issued is backed by sufficient collateral, credit enhancements and commitments to provide liquidity to support receiving at least an A-1, P-1 and, in certain cases, an F1 rating.
The Firm had commitments to provide liquidity on an assetspecific basis to these vehicles in an amount up to $18.0 billion at December 31, 2003, and $23.5 billion at December 31, 2002.
Third-party banks had commitments to provide liquidity on an asset-specific basis to these vehicles in an amount up to $700 million at December 31, 2003, and up to $900 million at December 31, 2002.
Asset-specific liquidity is the primary source of liquidity support for the conduits.
In addition, program-wide liquidity is provided by JPMorgan Chase to these vehicles in the event of short-term disruptions in the commercial paper market; these commitments totaled $2.6 billion and $2.7 billion at December 31, 2003 and 2002, respectively.
For certain multi-seller conduits, JPMorgan Chase also provides limited credit enhancement, primarily through the issuance of letters of credit.
Commitments under these letters of credit totaled $1.9 billion and $3.4 billion at December 31, 2003 and 2002, respectively.
JPMorgan Chase applies the same underwriting standards in making liquidity commitments to conduits as the Firm would with other extensions of credit.
If JPMorgan Chase were downgraded below A-1, P-1 and, in certain cases, F1, the Firm could also be required to provide funding under these liquidity commitments, since commercial paper rated below A-1, P-1 or F1 would generally not be issuable by the vehicle.
Under these circumstances, the Firm could either replace itself as liquidity provider or facilitate the sale or refinancing of the assets held in the VIE in other markets.
JPMorgan Chase’s maximum credit exposure to these vehicles at December 31, 2003, is $18.7 billion, as the Firm cannot be obligated to fund the entire notional amounts of asset-specific liquidity, program-wide liquidity and credit enhancement facilities at the same time.
However, the Firm views its credit exposure to multi-seller conduit transactions as limited.
This is because, for the most part, the Firm is not required to fund under the liquidity facilities if the assets in the VIE are in default.
Additionally, the Firm’s obligations under the letters of credit are secondary to the risk of first loss provided by the client or other third parties – for example, by the overcollateralization of the VIE with the assets sold to it.
JPMorgan Chase consolidated these asset-backed commercial paper conduits at July 1, 2003, in accordance with FIN 46 and recorded the assets and liabilities of the conduits on its Consolidated balance sheet.
In December 2003, one of the multi-seller conduits was restructured with the issuance of preferred securities acquired by an independent third-party investor, who will absorb the majority of the expected losses Notes to consolidated financial statement of the conduit.
In determining the primary beneficiary of the conduit, the Firm leveraged an existing rating agency model that is an independent market standard to size the expected losses and considered the relative rights and obligations of each of the variable interest holders.
As a result of the restructuring, JPMorgan Chase deconsolidated approximately $5.4 billion of the vehicle’s assets and liabilities as of December 31, 2003.
The remaining conduits continue to be consolidated on the Firm’s balance sheet at December 31, 2003: $4.8 billion of assets recorded in Loans, and $1.5 billion of assets recorded in Available-for-sale securities.
Client intermediation As a financial intermediary, the Firm is involved in structuring VIE transactions to meet investor and client needs.
The Firm intermediates various types of risks (including, for example, fixed income, equity and credit), typically using derivative instruments.
In certain circumstances, the Firm also provides liquidity and other support to the VIEs to facilitate the transaction.
The Firm’s current exposure to nonconsolidated VIEs is reflected in its Consolidated balance sheet or in the Notes to consolidated financial statements.
The risks inherent in derivative instruments or liquidity commitments are managed similarly to other credit, market and liquidity risks to which the Firm is exposed.
Assets held by certain client intermediation–related VIEs at December 31, 2003 and 2002, were as follows:
## Table 0 ##
The Firm has created structured commercial loan vehicles managed by third parties, in which loans are purchased from third parties or through the Firm’s syndication and trading functions and funded by issuing commercial paper.
Investors provide collateral and have a first risk of loss up to the amount of collateral pledged.
The Firm retains a second-risk-of-loss position for these vehicles and does not absorb a majority of the expected losses of the vehicles.
Documentation includes provisions intended, subject to certain conditions, to enable JPMorgan Chase to terminate the transactions related to a particular loan vehicle if the value of the relevant portfolio declines below a specified level.
The amount of the commercial paper issued by these vehicles totaled $5.3 billion as of December 31, 2003, and $7.2 billion as of December 31, 2002.
JPMorgan Chase was committed to provide liquidity to these VIEs of up to $8.0 billion at December 31, 2003, and $12.0 billion at December 31, 2002.
The Firm’s maximum exposure to loss to these vehicles at December 31, 2003, was $5.5 billion, which reflects the netting of collateral and other program limits.
JPMorgan Chase uses forward foreign exchange contracts and foreign currency–denominated debt instruments to protect the value of its net investments in its non-U.
S.  subsidiaries in foreign currencies.
The portion of the hedging instruments excluded from the assessment of hedge effectiveness (forward points) is recorded in Net interest income.
The following table presents derivative instrument- and hedging-related activities for the period indicated:
## Table 1 ##
(a) Includes ineffectiveness and the components of hedging instruments that have been excluded from the assessment of hedge effectiveness.
Over the next 12 months, it is expected that $124 million (aftertax) of net losses recorded in Other comprehensive income at December 31, 2003, will be recognized in earnings.
The maximum length of time over which forecasted transactions are hedged is 10 years, related to core lending and borrowing activities.
In 2001, the adoption of SFAS 133 resulted in an after-tax reduction to net income of $25 million and an after-tax reduction to Other comprehensive income of $36 million.
Due to SFAS 133, JPMorgan Chase changed certain hedging strategies and elected not to designate some derivatives utilized to manage economic exposure as accounting hedges.
For example, to moderate its use of derivatives, the mortgage business began using AFS securities as economic hedges of mortgage servicing rights.
Changes in the fair value of credit derivatives used to manage the Firm’s credit risk are recorded in Trading revenue because of the difficulties in qualifying such contracts as hedges of loans and commitments.
Note 29 Off-balance sheet lending-related financial instruments and guarantees JPMorgan Chase utilizes lending-related financial instruments (e. g. , commitments and guarantees) to meet the financing needs of its customers.
The contractual amount of these financial instruments represents the maximum possible credit risk should the counterparty draw down the commitment or the Firm fulfill its obligation under the guarantee, and the counterparty were to subsequently fail to perform according to the terms of the contract.
Most of these commitments and guarantees expire without a default occurring or without being drawn.
As a result, the total contractual amount of these instruments is not, in the Firm’s view, representative of its actual future credit exposure or funding requirements.
Further, certain commitments, primarily related to consumer financings, are cancelable, upon notice, at the option of the Firm.
To provide for the risk of loss inherent in commercial-related contracts, an allowance for credit losses is maintained.
See Note 12 on page 100 of this Annual Report for a further discussion of the Allowance for credit losses on lending-related commitments.
The following table summarizes the contract amounts relating to off–balance sheet lending-related financial instruments and guarantees at December 31, 2003 and 2002: Off-balance sheet lending-related financial instruments
## Table 2 ##
(a) Net of risk participations totaling $16.5 billion and $15.6 billion at December 31, 2003 and 2002.
(b) Includes unused advised lines of credit totaling $19 billion at December 31, 2003 and $22 billion at December 31, 2002, which are not legally binding.
In regulatory filings with the Federal Reserve Board, unused advised lines are not reportable.
FIN 45 establishes guarantor’s accounting and disclosure requirements for guarantees, requiring that a guarantor recognize, at the inception of a guarantee, a liability in an amount equal to the fair value of the obligation undertaken in issuing the guarantee.
FIN 45 defines a guarantee as a contract that contingently requires the Firm to pay a guaranteed party, based on: (a) changes in an underlying asset, liability or equity security of the guaranteed party, or (b) a third party’s failure to perform under a specified agreement.
The Firm considers the following off-balance sheet lending arrangements to be guarantees under FIN 45: certain asset purchase agreements, standby letters of credit and financial guarantees, securities lending indemnifications, certain indemnification agreements included within third-party contractual arrangements and certain derivative contracts.
These guarantees are described in further detail below.
Segment results –  Operating basis (a
## Table 3 ##
(a) Represents the reported results excluding the impact of credit card securitizations and, in 2002, merger and restructuring costs and special items.
The table above shows JPMorgan Chase’s segment results.
These results reflect the manner in which the Firm’s financial informa- tion is currently evaluated by management and is presented on an operating basis.
Prior-period segment results have been adjusted to reflect alignment of management accounting policies or changes in organizational structure among businesses.
IBreported record earnings of $3.7 billion for 2003, up 183% from 2002, driven by strong growth in capital markets revenues and equity underwriting fees, coupled with a significant decline in credit costs.
The low–interest-rate environment, improvement in equity markets and volatility in credit markets produced increased client and portfolio management revenue in fixed income and equities, as well as strong returns in Global Treasury.
Market-share gains in equity underwriting contributed to the increase in Investment banking fees over 2002.
IB’s return on allocated capital was 19% for the year.
TSSearnings of $520 million for the year were down 16% compared with 2002.
Revenues were $4.0 billion for the full year, up 3% from 2002.
Institutional Trust Services and Treasury Services posted single-digit revenue growth.
Investor Services revenue declined year-over-year but showed an improving trend over the last four consecutive quarters.
Return on allocated capi- tal for TSS was 19% for the year.
IMPBincreased earnings and assets under supervision in 2003.
Earnings of $268 million for the full year were up 3% from 2002, reflecting an improved credit portfolio, slightly higher rev- enues and the benefits of managed expense growth.
The increase in revenues reflected the acquisition of Retirement Plan Services, and increased average equity market valuations in client portfolios and brokerage activity, mostly offset by the impact of institutional net outflows.
Investment performance in core institutional products improved, with all major asset classes in U. S.  institutional fixed income and equities showing above- benchmark results.
Return on allocated capital was 5% for the year; return on tangible allocated capital was 20%.
JPMPperformance improved significantly, with private equity gains of $27 million, compared with private equity losses of $733 million for 2002.
Results for the direct investments portfo- lio improved by $929 million from 2002, driven by realized gains on sales and declining write-downs in the second half of 2003 JPMP revenue was impacted in 2003 by losses on sales and writedowns of private third-party fund investments.
JPMP decreased its operating loss for the year by 64% compared with 2002.
CFSposted record earnings of $2.5 billion, driven by record results and origination volumes at each of the national credit businesses – mortgage, credit card and auto.
Record revenues for CFS of $14.6 billion were up 9% from 2002, driven by record revenues in Chase Home Finance.
Despite significant deposit growth, Chase Regional Banking revenues decreased due to deposit spread compression.
CFS’s return on allocated capital was 28% for the year.
In 2003, JPMorgan Chase revised its internal management reporting policies to allocate certain revenues, expenses and tax- related items that had been recorded within the Corporate seg- ment to the other business segments.
There was no impact on the Firm’s overall earnings.
For a discussion of the Firm’s Segment results, see pages 27–44 of this Annual Report.
Capital and liquidity management JPMorgan Chase increased capital during 2003.
At December 31, 2003, the Firm’s Tier 1 capital was $43.2 billion, $5.6 billion higher than at December 31, 2002.
The Tier 1 capital ratio of 8.5% was well in excess of the minimum regulatory guidelines, it was 8.2% at year-end 2002.
The Firm maintained the quarterly dividend of $0.34 per share on its common stock.
JPMorgan Chase did not repur- chase shares of its common stock in 2003.
Management expects to recommend to the Board of Directors that the Firm resume its share repurchase program after the completion of the pending merger with Bank One Corporation (see Business events below).
The Firm’s liquidity management is designed to ensure sufficient liquidity resources to meet all its obligations, both on- and off–balance sheet, in a wide range of market environments.
The Firm’s access to the unsecured funding markets is dependent upon its credit rating.
During 2003, the Firm maintained senior debt ratings of AA-/Aa3/A+ at JPMorgan Chase Bank and A+/A1/A+ at the parent holding company.
Upon the announce- ment of the proposed merger with Bank One Corporation, Moody’s and Fitch placed the Firm’s ratings on review for an
by a $5.8 billion increase related to VIEs consolidated in accordance with FIN 46.
The decrease in lending-related commitments was due to an overall contraction in lending demand and reflected a $6.3 billion decline due to the adoption of FIN 46.
For further discussion of FIN 46, see Note 14 on pages 103–106 of this Annual Report.
The Firm also views its credit exposure on an “Economic” basis, which is the basis upon which it allocates credit capital to the lines of business.
The principal difference between the Firm’s credit exposure on a reported basis and Economic credit exposure relates to the way the Firm views its credit exposure to derivative receivables and lending-related commitments.
For derivative receivables, the Firm measures its Economic credit exposure using the Average exposure (“AVG”) metric.
This is a measure of the expected MTM value of the Firm’s derivative receivables at future time periods, including the benefit of collateral.
The three-year average of the AVG metric is the Firm’s Economic measure of derivative risk since three years is the average remaining life of the derivatives portfolio; it was $34 billion as of December 31, 2003.
For more information, see the Derivative contracts section of this Annual Report.
The following table reconciles Derivative receivables on a MTM basis with the Firm’s Economic credit exposure basis, a non-GAAP financial measure.
Reconciliation of Derivative Receivables to Economic Credit Exposure
## Table 4 ##
For commercial lending-related commitments, the Firm measures its Economic credit exposure using a “loan equivalent” amount for each commitment, rather than the contractual amount of the lending-related commitment.
The contractual amount represents the maximum possible credit risk should the counterparty draw down the commitment and subsequently default.
However, most of these commitments expire without a default occurring or without being drawn.
As a result, the total contractual amount of these instruments is not, in the Firm’s view, representative of the Firm’s actual future credit exposure or funding requirements.
In determining the Firm’s Economic credit exposure to commercial lending-related commitments, the Firm has established a “loanequivalent” amount for each commitment.
The loan-equivalent amount represents the portion of the unused commitment or other contingent exposure that is likely, based on average portfolio historical experience, to become outstanding in the event of a default by the obligor.
It is this amount that, in management’s view, represents the Firm’s Economic credit exposure to the obligor.
The aggregate amount of its Economic credit exposure associated with commercial lending-related commitments was $106.9 billion in 2003, compared with $115.5 billion in 2002.
The following table reconciles commercial lending–related commitments on a GAAP basis with the Firm’s Economic credit exposure basis, a non-GAAP financial measure.
Reconciliation of Commercial Lending-Related Commitments to Economic Credit Exposure

<table><tr><td>December 31, (in billions)</td><td>2003</td><td>2002</td></tr><tr><td>Structured commercial loan vehicles</td><td>$5.3</td><td>$7.2</td></tr><tr><td>Credit-linked note vehicles</td><td>17.7</td><td>9.2</td></tr><tr><td>Municipal bond vehicles</td><td>5.5</td><td>5.0</td></tr><tr><td>Other client intermediation vehicles</td><td>5.8</td><td>7.4</td></tr></table>
<table><tr><td>Year ended December 31, (in millions)</td><td>2003</td><td>2002</td></tr><tr><td>Fair value hedge ineffective net gains<sup>(a)</sup></td><td>$37</td><td>$441</td></tr><tr><td>Cash flow hedge ineffective net losses<sup>(a)</sup></td><td>-5</td><td>-1</td></tr><tr><td>Cash flow hedging gains on forecastedtransactions that failed to occur</td><td>—</td><td>—</td></tr></table>
<table><tr><td>December 31, (in millions)</td><td> 2003</td><td>2002</td></tr><tr><td>Consumer-related</td><td>$176,923</td><td>$151,138</td></tr><tr><td>Commercial-related:</td><td></td><td></td></tr><tr><td>Other unfunded commitments to extend credit<sup>(a)(b)</sup></td><td>$176,222</td><td>$196,654</td></tr><tr><td>Standby letters of credit and guarantees<sup>(a)</sup></td><td>35,332</td><td>38,848</td></tr><tr><td>Other letters of credit<sup>(a)</sup></td><td>4,204</td><td>2,618</td></tr><tr><td>Total commercial-related</td><td>$215,758</td><td>$238,120</td></tr><tr><td>Customers’ securities lent</td><td>$143,143</td><td>$101,503</td></tr></table>
<table><tr><td>Year ended December 31,</td><td colspan="2">Operating revenue (loss) Change from</td><td colspan="2">Operating earnings (losses) Change from</td><td colspan="2"> Return on allocated capital</td></tr><tr><td>(in millions, except ratios)</td><td>2003</td><td>2002</td><td>2003</td><td>2002</td><td>2003</td><td>2002</td></tr><tr><td>Investment Bank</td><td>$14,440</td><td>16%</td><td>$3,685</td><td>183%</td><td>19%</td><td>6%</td></tr><tr><td>Treasury & Securities Services</td><td>3,992</td><td>3</td><td>520</td><td>-16</td><td>19</td><td>23</td></tr><tr><td>Investment Management &Private Banking</td><td>2,878</td><td>1</td><td>268</td><td>3</td><td>5</td><td>5</td></tr><tr><td>JPMorgan Partners</td><td>-190</td><td>81</td><td>-293</td><td>64</td><td>NM</td><td>NM</td></tr><tr><td>Chase Financial Services</td><td>14,632</td><td>9</td><td>2,495</td><td>8</td><td>28</td><td>27</td></tr><tr><td>Support Units and Corporate</td><td>-626</td><td>—</td><td>44</td><td>NM</td><td>NM</td><td>NM</td></tr><tr><td>JPMorgan Chase</td><td>$35,126</td><td>13%</td><td>$6,719</td><td>99%</td><td>16%</td><td>8%</td></tr></table>
<table><tr><td>As of December 31, (in billions)</td><td>2003</td><td>2002</td></tr><tr><td> Derivative receivables:</td><td></td><td></td></tr><tr><td>Derivative receivables MTM</td><td>$84</td><td>$83</td></tr><tr><td>Collateral held against derivatives</td><td>-36</td><td>-30</td></tr><tr><td>Derivative receivables – net current exposure</td><td>48</td><td>53</td></tr><tr><td>Reduction in exposure to 3-year average exposure</td><td>-14</td><td>-19</td></tr><tr><td>Economic credit exposure</td><td>$34</td><td>$34</td></tr></table>

Question: what was the decline in commercial paper issued by conduits during 2003 , in b?
Answer: 5.8