By Marcy Gordon
AP Business Writer
WASHINGTON (AP) -- A top federal regulator says JPMorgan Chase had weak controls in place to contain risk in its investment division that suffered a $2 billion-plus trading loss.
U.S. Comptroller of the Currency Thomas Curry told a Senate panel on Wednesday that the nation's largest bank began reducing the amount of hedging it was doing to minimize potential losses at the end of 2011. Curry's agency is examining JPMorgan's risk-containment policies in the weeks before it suffered the trading loss this spring.
Curry told the Senate Banking Committee that "inadequate risk management" was the problem. He said his agency is conducting an extensive review that "will focus on where breakdowns or failures occurred."
Senators pressed Curry to explain why regulators weren't able to detect the risks that led to the loss earlier.
Did the Comptroller's Office, which had 65 examiners onsite at JPMorgan's offices, "screw up" in monitoring the bank, asked Sen. Bob Menendez, D-N.J.
"We're going to critically look at that question," Curry responded. "It will be a critical self-review."
The Office of the Comptroller of the Currency, which is part of the Treasury Department, oversees about 2,000 banks.
JPMorgan's $2 billion-plus trading loss has renewed calls from lawmakers and Obama administration officials for tougher regulation.
JPMorgan spokesmen declined to comment on Curry's remarks. The bank's CEO Jamie Dimon acknowledged the loss May 10, weeks after dismissing concerns about the bank's trading as a "tempest in a teapot." He more recently called the loss "a black mark" for the bank.
Dimon has said the loss came from trading in credit derivatives that was designed to hedge against financial risk, not to make a profit for the bank.
The Federal Reserve also is conducting a review of the JPMorgan loss.
Regulators say the loss underscores the need to tighten rules mandated under the 2010 financial overhaul law.
The misstep at JPMorgan has revived debate over the so-called Volcker Rule, which would prevent banks from trading for their own profit. The idea is to protect depositors' money, which is insured by the government. Regulators are completing work on the rule, which is scheduled to take effect in July.
Published: Thu, Jun 7, 2012
