Update.. Tumor topic
May 18, 2012 § Leave a comment
Today I heard how Sir Winfrey Bischoff – former Citigroup Chief, now lloyds I seem to recall – ascfibed himself a fan of JP Morgan Chase bank and Jamie Dimon because of its good ‘risk culture’.
Pointed out in newsmedia follow-ups – among which WSJ and CNBC – we have learned that this profile may not be all it is cracked up to be..
The JPMorgan Chase unit that lost more than $2 billion through a failed hedging strategy had looser risk controls than the rest of the bank.. The risk of losses is tallied by the bank using a so-called value at risk (VaR) calculation. However, the Chief Investment Office, the unit responsible for the high-profile loss that JPMorgan disclosed last Thursday, had a separate VaR system.. It used a less stringent calculation that gave a lower risk assessment of its trades, according to people who previously worked at the bank. The unit also reported directly to CEO Jamie Dimon, a factor which allowed it to maintain a separate risk monitoring set-up to other parts of the investment bank, these people said.
The absence of transparency is pretty important here because the unit’s autonomy allowed risky position builds without triggering alarms.
Seems little question that a lower VaR breaks from the JP Morgan party line.
A couple of things worth adding are that Ina Drew offered resign in April when the probs boiled over. Someone capped this presumably because they didn’t want market realisation of untenable (likely also unwindable) positions. And they wouldn’t want that because others’ knowledge of the Bank’s fix would invite them taking the other side of those trades.
For what it’s worth some guys opine that but 4 days on from this disaster pertinent losses are already at $3bn !!