Revolving Door
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JPMorgan Chase’s chief risk officer is taking a temporary sabbatical, marking the latest move in an extensive reshuffling of JPMorgan’s executive suite following a botched credit bet that has cost the bank more than $6 billion.
The executive, John Hogan, said in a memo to employees Friday that he would leave the nation’s largest bank 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.
As chief risk officer, Mr. Hogan has 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, undercutting the reputation of the bank and its chief executive, Jamie Dimon, who was long known for his deft handling of risk.
In less than a year, JPMorgan has vastly upended its executive suite, elevated a team of younger executives and clawed back millions of dollars in compensation from executives tainted by the bungled trades. Ina R. Drew, who headed the chief investment office, resigned shortly after the trading losses were announced.
Mr. Hogan had been planning for the past couple of months to take a temporary leave after the death of his father in November, according to several people close to Mr. Hogan.
“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 JPMorgan.
Mr. Hogan, 46, was spared from criticism in an internal investigation of the losses led by Michael J. Cavanagh, the co-head of the corporate and investment bank. While the report, which was critical of Mr. Dimon for relying too heavily on assurances of others at the bank, leveled its most vicious attacks on the executives directly responsible for reining in the outsize bets of London traders in the chief investment office, a once little known unit. The 129-page report, which the bank released last week during its quarterly earnings call, laid much of the blame on Mr. Zubrow and Douglas Braunstein, who was the bank’s chief financial officer.
In another blow to the bank’s once vaunted risk reputation, federal banking regulators hit JPMorgan this month with two enforcement actions for gulfs in risk management that caused the multi-billion trading loss.
The two cease-and-desist orders from the Office of the Comptroller of the Currency and the Federal Reserve spotted several weaknesses throughout the bank, including problems related to how JPMorgan quantified potential losses from a series of complex trades. In addition, the orders faulted bank executives for not better informing the board as the wagers in the chief investment office grew increasingly risky.
To reassure skittish investors and regulators that JPMorgan has revamped its risk oversight, JPMorgan’s board dealt a stunning blow to Mr. Dimon. Last week, the board voted uninanimously to slash Mr. Dimon’s pay to $11.5 million, down from $23.1 million a year earlier.
Still, some federal regulators are concerned that the board lacks the financial acumen to control the bank’s risky activities, according to several regulators.
The cut to Mr. Dimon’s pay were announced last week when the bank reported that its earnings surged to a record of $21.3 billion.
Article source: http://dealbook.nytimes.com/2013/01/25/top-jpmorgan-executive-takes-temporary-leave-amid-reshuffling/?partner=rss&emc=rss
