NEW YORK, Sept 12 JPMorgan Chase & Co
plans to spend an additional $4 billion and commit 5,000 extra
employees to fix risk and compliance issues after a slew of
investigations by regulatory authorities, the Wall Street
Journal reported on Thursday.
JPMorgan will spend $1.5 billion on managing risk and
complying with regulations and plans to add $2.5 billion to its
litigation reserves in the second half of the year, the Journal
The bank will also increase its risk-control staff by 30
percent, the WSJ said, citing people familiar with the matter.
JPMorgan said on Monday that it would add more than $1.5
billion to its legal reserves in the third quarter and 3,000
people had been added to control functions.
Another 2,000 assigned to the bank's various business lines
are also working on compliance issues, a person familiar with
the matter who would not provide the total cost told Reuters.
Chief Executive Jamie Dimon said in April in his annual
letter to shareholders that the bank's first priority had become
fixing its control and compliance issues. He warned then that
the company was forgoing some business investment projects to do
On Monday, the company called the effort "unprecedented" and
said it now involves 23 different work streams, including
remedial work on the capital plan it had submitted to the
Federal Reserve earlier this year and actions the government
ordered in January to fix its controls, abide the Bank Secrecy
Act and fight money laundering.
The Journal quoted Dimon as saying in an interview that the
work "will make us stronger in the long run."
JPMorgan has been under intense scrutiny from regulators
since May 2012 when Dimon announced that the company was losing
billions of dollars in a corporate office in London on
derivatives trades that were far worse than he knew.
Dimon initially called news reports of possible losses by a
trader known as the "London Whale" a "tempest in a teapot". The
positions ultimately cost more than $6.2 billion.
Since the derivatives debacle, the U.S. Department of
Justice, the Securities and Exchange Commission and other
government agencies have developed investigations into subjects
including energy trading, possibly bribery in hiring practices
in China, possibly fraudulent sales of mortgage securities.
The multiple probes are driving the higher costs for
litigation, the company said on Monday. Chief Financial Officer
Marianne Lake said then that the legal tab was still being
calculated and promised to provide more details when the company
next reports quarterly results on Oct. 11.
The company spent about $5 billion, pre-tax, on litigation
in each of the past two years.
This year JPMorgan's legal costs are likely to reach similar
levels, analyst Charles Peabody of Portales Partners has said.
JPMorgan reported $21.3 billion in net income for 2012.