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Jp Morgan Chase Bank Case Study

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JP MORGAN CHASE JP Morgan Chase bank is the largest bank in United States by assets with its total assets valued at $2.515 trillion. Its hedge fund unit is the second largest in U.S. Its headquarters are Located in Manhattan in New York. Its stock forms part of the SP500 index and the Dow Jones. JP Morgan Chase bank is a subsidiary to the holding business JP Morgan Chase & Company. It is known for its leading derivatives business. However, in 2012 the derivatives business posted a loss of $2 billion which months later the figure escalated to $5.8 billion. This happened from its Chief Investment Office in London. How did JP Morgan lose? It is from the Chief investment Office (C.I.O) in London that made JP Morgan incur the loss. Though the same …show more content…

Reason being that the value of the credit default swaps had declined a factor led by the confidence in the European corporate credit. The reaction by the S.C.P was to sell the credit default swaps. No sooner had they decided to take this move than the worse happened. The European economy fell into financial crisis.In February and March the losses were in a streak of $69 million and $ 550 million respectively. On 23rd March 2012 Ms. Ina Drew ordered the traders to stop trading. This was evident that they were no longer hedging but speculating.The losses continued accruing and by May the same year S.C.P was reporting losses of $2 billion, in July 2012 the loss was 5.8 billion. JP Morgan Chase was unable to answer to the subcommittee various questions. The first was why it acted ultravires. S.C.P was purpose was to hedge and not to speculate. The losses that JP Morgan Chase had faced were as a result of the speculation. A drilldown to find the objectives, the assets, the portfolio and items that S.C.P used did not bear fruits. This meant that therewas likely a loophole and that there is possibility that some losses and trades were hidden. The other question was why S.C.P was treated differently from other …show more content…

In February and March 2008 JP Morgan Chase omitted certain reports that it used to present to the O.C.C about the C.I.O. This went unnoticed by the O.C.C and left O.C.C in the dark. The C.I.O did not adhere to an agreement it had reached with O.C.C to reduce its notional size in January 2012. It instead increased the notional size to $157 billion through purchase and sell of the derivatives. This was a breach of the Value at risk limit and the O.C.C did not take action on this

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