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JPMorgan Chase London Whale E: Supervisory Oversight

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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.

Suggested Citation

  • Metrick, Andrew, 2019. "JPMorgan Chase London Whale E: Supervisory Oversight," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 1(2), pages 103-115, March.
    • Handle: RePEc:ysm:ypfsfc:1266
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1018&context=journal-of-financial-crises
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    Cited by:

    1. Odusami, Babatunde O. & Akinsomi, Omokolade, 2024. "Diversifying and hedging REIT portfolios with cryptocurrencies: Evidence from global and regional REIT indices," International Review of Financial Analysis, Elsevier, vol. 94(C).
    2. Pilkington, Marc, 2022. "The London Whale Scandal under new Scrutiny," International Review of Financial Analysis, Elsevier, vol. 80(C).

    More about this item

    Keywords

    JPMorgan Chase; London Whale; risk management; SCP; derivatives; OCC; CIO; supervision;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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