U.S. banking regulators on Monday ordered banking giant JPMorgan Chase & Co. (JPM: Quote) to improve its risk management oversight following massive losses at the company’s Chief Investment Office last year. The company was also ordered to strengthen its anti-money laundering mechanism.
The Federal Reserve issued two consent cease and desist orders against JPMorgan. The first order requires the company to take corrective action to continue ongoing enhancements to its risk-management program and its finance and internal audit functions, particularly in regard to the company’s Chief Investment Office.
Last year, JPMorgan revealed that it had sustained massive losses as a result of a bad bet by the Chief Investment Office related to credit derivatives. The losses eventually swelled to more than $6 billion. Bruno Iksil, the U.K. trader nicknamed the “London Whale”, made wrong-way bets on credit derivatives that fueled the losses. JPMorgan CEO Jamie Dimon has termed the losses as “egregious” and “self inflicted”.
The second order from the Federal Reserve requires JPMorgan to take corrective action to boost its program for compliance with the Bank Secrecy Act and other anti-money laundering requirements at the company’s various subsidiaries.
The Office of the Comptroller of the Currency also issued two similar consent orders against JPMorgan Chase Bank, N.A.
Neither order contained any provision for imposing fine or monetary penalty on JPMorgan. The company consented to the orders without admitting or denying wrongdoing.
The Fed requires JPMorgan to submit a plan within 60 days to enhance oversight of risk management, internal-audit and finance functions. The company has 90 days to submit to a plan to continue ongoing enhancements to the finance function, particularly with respect to the CIO finance function.
JPMorgan shares, which are trading in a range of $30.83 to $46.49 over the past year, closed Monday’s regular trading session at $45.88, down 26 cents, and lost an additional 14 cents in after hours trading.
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by RTT Staff Writer
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