JPMorgan Chase & Co. (JPM) Chief Risk Officer John Hogan, whose tenure included the bank’s worst-ever trading loss, will take a temporary leave for personal reasons beginning later this month, he said in a memo to staff.
“I’m looking forward to taking this time off to spend with my family and friends,” Hogan wrote in a memo obtained yesterday. Deputy Risk Officer Ashley Bacon will fill in until Hogan returns this summer, he said. Hogan discussed his plans with top managers including Chief Executive Officer Jamie Dimon, he said.
Hogan, previously chief risk officer for the investment bank, took his post a year ago, about three months before the New York-based company disclosed a large and illiquid trading position at the chief investment office. The holdings lost more than $6.2 billion in the first nine months of last year and JPMorgan’s market value dropped more than $50 billion in the weeks after the so-called London Whale episode become public.
The contents of the memo were confirmed by Joe Evangelisti, a spokesman for JPMorgan, which ranks first by assets among U.S. lenders. The stock gained 1.7 percent yesterday to $47.16 in New York.
The bank, in a 129-page internal report released Jan. 16, described an “error-prone” risk-modeling system in the CIO that required employees to cut and paste electronic data to a spreadsheet. Workers inadvertently used the sum of two numbers instead of the average in calculating volatility. The firm also reiterated that London traders tried to hide losses.
Risk Models
The company found more flaws with its risk-modeling systems in other divisions over the course of the almost eight-month review that Dimon, 56, said the bank is fixing.
The report blamed managers, many of whom were reassigned or left last year, for roles in failing to halt the loss. The executives include former Chief Investment Officer Ina Drew, Barry Zubrow, ex-head of companywide risk management, and former Chief Financial Officer Doug Braunstein.
“Mr. Dimon bears ultimate responsibility for the failures that led to the losses in CIO and has accepted responsibility,” the bank said.
Hogan, who declined to comment, was among top executives who questioned Dimon in the years after the financial crisis about why the CIO didn’t have as extensive or robust risk controls as other departments, people who witnessed or participated in those conversations said last year.
The report said that Hogan, 46, “did not have sufficient time to ensure that the CIO risk organization was operating as it should. Nevertheless, the Task Force notes that there were opportunities during the first and second quarters of 2012 when further inquiry might have uncovered issues earlier.”
Hogan received a bonus for his work in 2012 that included 77,287 shares of restricted stock valued at $3.6 million when they were awarded on Jan. 17. He received 95,212 shares the year before that were worth $3.4 million at the time.
Bloomberg
