Summary – The Board Should Enhance Its Supervisory Processes as a Result of Lessons Learned From the Federal Reserve’s Supervision of JPMorgan Chase & Company’s Chief Investment Office: “In May 2012, media outlets reported that JPMorgan Chase & Company’s (JPMC) Chief Investment Office (CIO) incurred approximately $2 billion in losses due to a complex trading strategy involving credit derivatives. Losses continued over the following months and surpassed $6 billion by the end of 2012. This matter highlighted corporate governance, risk management, and internal control weaknesses at JPMC, which resulted in reputational damage to the institution and considerable congressional, regulatory, and public scrutiny.  In July 2012, we initiated this evaluation (1) to assess the effectiveness of the Board of Governors of the Federal Reserve System’s (Board) and the Federal Reserve Bank of New York’s (FRB New York) consolidated and other supervisory activities regarding JPMC’s CIO and (2) to identify lessons learned for enhancing future supervisory activities.  To address our objectives as comprehensively as possible, we selected July 2004 through April 2012 as the time period for our evaluation. July 2004 marked JPMC’s merger with Bank One Corporation (Bank One), and JPMC created the CIO in 2005. April 2012 marked the publication of media articles describing the CIO’s derivative positions. We selected this lengthy time frame so that we could trace the evolution of the CIO’s strategy, activities, and governance and risk management framework. Our complete report contains supervisory information that is privileged and confidential and is thus restricted from public distribution.”

• Redacted Version of the Complete Report – The Board Should Enhance Its Supervisory Processes as a Result of Lessons Learned From the
  Federal Reserve’s Supervision of JPMorgan Chase & Company’s Chief Investment Office Evaluation Report 2014-SR-B-017. October 17, 2014