* OCC’s Curry: to review compensation of unit in $2 bln loss
* Says trading loss will impact earnings, but not solvency
* Meeting daily with JPMorgan to reduce trading risks
By Dave Clarke and Alexandra Alper
WASHINGTON, June 5 (Reuters) – U.S. bank regulators will
review whether JPMorgan Chase & Co executives should
have to give back compensation due to the bank’s failed hedging
strategy that has produced at least $2 billion in losses, the
head of the Office of the Comptroller of the Currency said.
OCC chief Thomas Curry said his agency will evaluate the
compensation of the Chief Investment Office responsible for the
trading loss, and will assess JPMorgan’s determination on
clawbacks as part of that evaluation.
In testimony prepared to be delivered before the Senate
Banking Committee on Wednesday and obtained by Reuters, Curry
also said JPMorgan’s trading loss will affect its earnings but
does not present a solvency issue and does not threaten the
broader financial system.
He said the OCC is meeting daily with JPMorgan managers to
reduce the risks associated with the trading portfolio.
Regulators have come under scrutiny for not raising red
flags earlier about the massive hedging strategy that went awry,
despite having more than 100 examiners embedded at JPMorgan.
The OCC regulates JPMorgan’s banking activities, while the
Federal Reserve Bank of New York is the primary regulator of
JPMorgan’s holding company.
Curry is due to testify alongside Fed Governor Daniel
Tarullo, Federal Deposit Insurance Corp acting Chairman Martin
Gruenberg, Deputy Treasury Secretary Neal Wolin, and Consumer
Financial Protection Bureau Director Richard Cordray.
In his prepared testimony, Curry said OCC examiners met with
JPMorgan bank management in April to discuss the bank’s trading
activity, and directed JPMorgan to provide more information
about the transactions and their risks.
“Our examiners were in the process of evaluating the bank’s
current position and strategy when, at the end of April and
during the first days of May, the value of the position
deteriorated rapidly,” Curry said.
He said since that time, the OCC has been meeting daily with
JPMorgan managers to re-evaluate the bank’s risk management and
what actions JPMorgan should take to reduce the risk of the
positions at issue.
Curry also said that OCC examiners have not found activity
at other large banks similar to the scale or complexity of
JPMorgan’s trading activity.
