8:58 p.m. | Updated
JPMorgan Chase has continued to reshuffle its executive ranks and strengthen oversight as it works to appease regulators and reassure skittish investors.
JPMorgan, the nation’s largest bank, said Friday that its chief risk officer, John Hogan, would take a sabbatical. His departure follows a shake-up this week, when Martha Gallo was replaced as head of global compliance and regulatory management.
Cindy Armine, who joined the bank from Citigroup, has taken over the compliance role. Ms. Gallo was well regarded within the bank, in part for her strong relationships with regulators. JPMorgan has changed the chain of command for Ms. Armine’s role so that she will report directly to the bank’s chief operating officers, Matt Zames and Frank Bisignano.
Revolving Door
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JPMorgan’s management has faced mounting pressure from its board and federal regulators after revealing a multibillion-dollar trading loss last year. Since the botched trade became public in May, bank officials, including its chief executive, Jamie Dimon, have been aggressively working to address the problems, improve compliance and crack down on outsize risk-taking.
The incident has undercut Mr. Dimon’s reputation as a deft manager of risk, claimed the jobs of several top executives and forced the bank to claw back millions of dollars in compensation.
Regulators from the Office of the Comptroller of the Currency and the Federal Reserve have been pushing JPMorgan to strengthen its compliance and risk management, according to people with direct knowledge of the matter. In a blow to the bank, the agencies issued two cease-and-desist orders last week that ordered JPMorgan to bolster money-laundering controls that the government might not prevent suspicious cash from coursing through the bank.
“The bank already acknowledged questions from regulators when it received the consent orders and has remediated many of the issues,” said Joe Evangelisti, a company spokesman. He added that JPMorgan was “working hard to resolve the rest.”
As chief risk officer, Mr. Hogan presided over a tumultuous period at JPMorgan. He took over from Barry Zubrow just months before JPMorgan announced in May that a soured bet had caused roughly $2 billion in losses. The losses on the trade, made by the bank’s chief investment office, have since swelled to more than $6 billion.
JPMorgan’s board has been making a concerted effort to better police risk. The board’s risk committee at the time of the losses had only three members, a smaller group than many of its rivals on Wall Street. Since then, though, the board has changed the composition of the committee, elevating Timothy P. Flynn, formerly the chairman of the auditing firm KPMG. Last week, the bank released a 129-page report based on an internal investigation led by Michael J. Cavanagh, the co-head of the corporate and investment bank.
In a stunning move, meant to telegraph a message of strength to regulators, JPMorgan’s board this month voted unanimously to cut Mr. Dimon’s pay to $11.5 million, from $23.1 million a year earlier. The report was also critical of what it deemed Mr. Dimon’s over-reliance on assurances of others at the bank. But it leveled most of the criticism at the executives directly responsible for reining in the outsize bets of London traders in the chief investment office, a once little-known unit. It also laid much of the blame on Mr. Zubrow and Douglas Braunstein, who was then the bank’s chief financial officer.
Mr. Hogan, 46, was spared from criticism in that investigation. The bank’s board, however, did release a separate, 18-page report that raised questions about how the board was informed about the increasing risk-taking by the bank’s chief investment office.
In its cease-and-desist order on Jan. 14, the Comptroller of the Currency’s office, one of the bank’s top regulators, said the London unit was “able to increase its positions and risk, and ultimately losses, without sufficiently effective intervention by the bank’s control groups.”
In less than a year, JPMorgan has drastically upended its executive suite and elevated a team of younger executives. Ina R. Drew, who headed the chief investment office, resigned shortly after the trading losses were announced.
Mr. Hogan had been planning for the last couple of months to take a temporary leave after the death of his father in November, according to several people close to Mr. Hogan.
Mr. Hogan was awarded more compensation in 2012 than in a year earlier. He received a $4 million bonus in 2012, according to a regulatory filing last week.
In an memo circulated to employees on Friday, Mr. Hogan said that he would leave JPMorgan for four months. Ashley Bacon, who is currently the bank’s deputy chief risk officer, will take over until Mr. Hogan returns, which is expected during the summer, according to several people familiar with the matter.
“Later this month I plan to begin a sabbatical for a few months — returning to the firm in early summer in my current role as chief risk officer,” Mr. Hogan said in a memo provided by the bank.
Article source: http://dealbook.nytimes.com/2013/01/25/top-jpmorgan-executive-takes-temporary-leave-amid-reshuffling/?partner=rss&emc=rss
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