JPMorgan ordered to fix controls
(01-15 12:15)
The US federal financial regulators on Monday ordered JPMorgan Chase to strengthen risk and auditing controls after its London office lost more than US$6 billion in derivatives trades last year.
The Federal Reserve and the Office of the Comptroller of the Currency both issued cease-and-desist orders saying JPMorgan's board shall submit a written plan to enhance its oversight of risk management, internal audit, and finance functions. In particular, the board must also align compensation mechanism for senior management with "adverse risk outcomes and control deficiencies."
The US largest bank by assets disclosed last May that its London office suffered huge losses in trades designed to hedge against risk. Many senior executives resigned or stepped out of the top management as the bank tries to restore investor's trust.
The federal agencies' move marked the first regulatory sanctions against JPMorgan for its soured trade. The OCC said in the order that the bank had "committed to taking all necessary and appropriate steps to remedy the deficiencies, unsafe or unsound practices and violations of law or regulations," without admitting or denying any wrongdoing. Also no fines were detailed in neither orders.
The two federal regulators also issued orders requiring JPMorgan to beef up its anti-laundering controls, an action similar to the one taken last April against Citigroup. Last year, HSBC and Standard Chartered were fined hundreds of millions of dollars by the U.S. government as they were used to launder money, which refers to passing illicit profits through bank accounts or other legitimate businesses to disguise the unlawful activities.
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