JPMorgan Chase London Whale E Supervisory Oversight.pdf

yale program on financial stability, case study 2014-2e-v1 december 1,2014 1 JPMorgan Chase London Whale E: Supervisory Oversight Arwin G. Zeissler 2 Andrew Metrick 3 Abstract As a diversified financial service provider and the largest United States bank holding company, JPMorgan Chase (JPM) is supervised by multiple regulatory agencies. JPM’s commercial bank subsidiaries hold a national charter and therefore are regulated by the Office of the Comptroller of the Currency (OCC). Since the bank’s Chief Investment Office (CIO) invested the surplus deposits of JPM’s commercial bank units, the OCC was also CIO’s primary regulator. During the critical period from late January through March 2012, when CIO traders undertook the failed derivatives strategy that ultimately cost the bank $6 billion, JPM did not provide the OCC with required monthly reports that included CIO performance data and CIO’s internal reviews of the fair values assigned by traders to their derivative positions. However, OCC supervisors also failed to request the missing data, and thus found themselves surprised by the April 6 news stories unmasking the London Whale. _____________________________________________________________________ 1 This module is one of nine produced by the Yale Program on Financial Stability (YPFS) examining issues related to the JPMorgan Chase London Whale. The following are the other modules in this case series. • JP Morgan Chase London Whale A: Risky Busines s • JP Morgan Chase London Whale B: Derivatives Valuation • JP Morgan Chase London Whale C: Risk Limits, Metrics, and Models • JP Morgan Chase London Whale D: Risk Management Practices • JP Morgan Chase London Whale F: Required Securities Disclosures • JP Morgan Cha se London Whale G: Hedging Versus Proprietary Trading • JP Morgan Chase London Whale H: Cross -Border Regulation • JP Morg