“We are all well aware of the news around the legal and regulatory issues facing our company, and in the coming weeks and months we need to be braced for more to come,” Dimon said today in an e-mail to JPMorgan’s more than 250,000 employees.
JPMorgan, the largest U.S. lender, increased spending on internal controls by about $1 billion this year and dedicated more than $750 million “to address several of our consent orders,” Dimon said. At least 5,000 people at the New York-based company have been assigned to compliance, he said.
The bank will pay at least $750 million to close some regulatory probes into its record London Whale trading loss last year, people familiar with the matter said. That includes about $200 million to resolve Securities and Exchange Commission claims, a person with knowledge of the matter said today, requesting anonymity because the agreement isn’t public.
The Commodity Futures Trading Commission, which has been investigating whether the bank manipulated trading in credit derivatives, is unlikely to announce a settlement at the same time as the other regulators, according to people familiar with the matter.
The 2010 Dodd-Frank Act made it easier for the CFTC to bring cases against traders accused of manipulating derivatives markets. The CFTC completed rules in 2011 that require the agency to show that traders acted recklessly in manipulative schemes. Earlier rules required the enforcement division to prove that traders intentionally manipulated markets. The CFTC’s investigation into possible manipulation would fall under the new standards, one of the people said.
The expected regulatory settlements won’t affect criminal probes of JPMorgan, according to a person familiar with the matter who asked not to be identified because the matter isn’t public.
The Justice Department, which charged two former JPMorgan traders for allegedly trying to conceal the so-called London Whale loss last year, is continuing its investigation of that matter, the person said. It’s also examining possible manipulation of the energy markets and whether Bear Stearns Cos., which JPMorgan acquired in 2008, provided misleading information about its mortgage bonds prior to the financial crisis, according to the person.
The bank is also the target of other criminal investigations, including probes into mortgage bond sales practices and hiring in Asia, people familiar with the matter have said.
JPMorgan is operating under consent orders for previous violations including municipal bond trading, foreclosures, anti-money laundering practices and internal controls.
“We have re-prioritized our major projects and initiatives, deployed massive new resources and refocused critical managerial time on this effort,” said Dimon, 57.
JPMorgan is simplifying its business by eliminating products and services that aren’t central to its operations, Dimon said. The bank quit student lending, is getting out of physical commodities sales and trading, and will cut use of outside vendors, he said. JPMorgan is also reviewing ties with foreign banks while seeking to strengthen anti-money laundering controls, he said.
Dimon in past years criticized banking regulators in the U.S. and abroad for producing rules that he said threatened to impair economic growth. In today’s letter, Dimon said, “we are building a more open and transparent relationship with our regulators.”