JPMorgan Chase London Whale D: Risk Management Practices
Yale Program on Financial Stability Case Study 2014-2D-V1
10 Pages Posted: 18 Mar 2015
Date Written: December 1, 2014
JPMorgan Chase (JPM) prided itself on having the best risk management practices in the financial industry, having survived the 2007-2009 financial crisis in better shape than many competitors. Chief Executive Officer Jamie Dimon often spoke of the bank’s “fortress balance sheet”. A keen focus on risk management is vital to JPM’s longevity, as is the case with all highly leveraged financial institutions. However, the JPM Task Force that investigated the $6 billion 2012 London Whale trading loss concluded that risk management practices at the bank’s Chief Investment Office (CIO), the unit in which the loss occurred, were given less scrutiny by senior management than those of the bank’s client-facing businesses, despite the fact that the Chief Investment Office managed $350 billion in assets, an amount almost double JPM’s total stockholders’ equity at December 31, 2011.
Keywords: Systemic Risk, Financial Crises, Financial Regulation
JEL Classification: G01, G28
Suggested Citation: Suggested Citation