The Inadequacies of JPMorgan Chase
“Inadequate oversight and governance to protect the bank from material risk, inadequate risk management processes and procedures, inadequate control over trade valuation, inadequate development and implementation of models used by the bank, and inadequate internal audit processes,” are among the deficiencies that the Federal Reserve and Office of the Comptroller of the Currency found in JPMorgan’s (NYSE:JPM) derivative trading activities.
Last year, JPMorgan lost about $6.2 billion in a highly-publicized fiasco centered around a London-based trader nicknamed the London Whale. This trader, whose real name is Bruno Iksil, made outsized credit derivative bets that clearly did not work out in his favor. Regulators from both the United States and the United Kingdom opened investigations into JPMorgan as a result, and now the first mandates have come from on high.
Regulators are not requiring the bank to pay fines (not yet, at least) but have outlined steps that the bank should take to upgrade its risk management. These include revisions to the inadequacies mentioned above, as well as changes to internal process such as the way that issues are elevated from trading desks (like the one in London) through management and to the board of directors…