JPMorgan Chase London Whale D: Risk-Management Practices

Andrew Metrick

Journal of Financial Crises, 2019, vol. 1, issue 2, 92-102

Abstract: JPMorgan Chase (JPM) prided itself on having the best risk-management practices in the financial industry, having survived the 2007-09 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: Risk Management; London Whale; CIO; trading; derivatives; Value at Risk; SCP (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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