JPMorgan Chase & Co. (JPM) caught regulators off guard with a trading loss of at least $2 billion because the bank’s reporting lacked enough detail to raise any alarm, the U.S. Comptroller of the Currency said.
“In hindsight, if the reporting were more robust or granular, we believe we may have had an inkling of the size and potential complexity and risk of the position,” Comptroller Thomas Curry said today at a hearing of the House Financial Services Committee in Washington.
Lawmakers are challenging regulators and JPMorgan Chief Executive Officer Jamie Dimon about a loss on credit derivatives at the company’s chief investment office. Dimon told a Senate panel last week that the trade, originally designed as a hedge at the New York-based lender, “changed into something I cannot publicly defend.”
Representative Carolyn Maloney, the New York Democrat, pressed Curry on whether the loss would prompt Curry to shift more resources to London, where JPMorgan’s loss originated. Curry said this month that his office has five examiners at the JPMorgan’s London office and 65 at the bank’s headquarters.
“We will use our experience here and our review of JPMorgan Chase to reevaluate the numbers and strength of the personnel in our London office,” Curry said today. “We also bring to bear in our targeted examinations and overall supervision of the bank, the entire strength of the OCC in terms of expertise and number of examiners, which are close to 2,500 individuals.”
Curry said focusing on the five examiners in London “may be misleading as to our ability to leverage our activities.”
Representative Barney Frank, the Massachusetts Democrat, said the error at New York-based JPMorgan shows that regulatory oversight of derivatives shouldn’t be weakened, as Dimon has advocated.
“If in a very well-run bank, you can get this loss of several billion dollars -- three and counting, we’re told -- in a fairly short period of time, it’s an indication of the problems with derivatives,” Frank said at today’s hearing.
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