NEW YORK – JP Morgan Chase & Company (NYSE:JPM) was in the spotlight again as the Department of Justice (DOJ) announced an investigation into the bank’s hiring practices in China. According to filings by the DOJ, the bank is currently facing six separate investigations, which could force the nation’s largest bank to face up to $ 6.8 billion on future losses above its existing reserves.
That amount is larger than any other U.S. bank and puts JP Morgan ahead of Bank of America (NYSE:BAC) in terms of legal costs and settlements. The bank stated that it is currently cooperating with an investigation into hiring practices in China including ‘business relationships with certain clients.’ On Saturday, The New York Times (NYSE:NYT) reported that the Securities and Exchange Commission (SEC) was looking into the bank’s hiring of the children of Chinese officials. Referring to the SEC’s investigation, a representative for JP Morgan said they are ‘fully cooperating with regulators’ but declined to give more information.
The recent announcements were another in a series of setbacks for JP Morgan as they try to move past the ‘London Whale’ trading fiasco that raised larger questions about oversight at what was believed to be Wall Street’s best risk manager. The bank is currently facing four enforcement actions in regards to various risk-management and anti-money-laundering controls, and hundreds of employees have been redeployed to deal with the mounting requests. At this point bank officials acknowledge it will take years to address all its problems and regain the trust of regulators.
While the bank anticipated heightened scrutiny from the Government after revealing billions in losses last year, some current and former executives are reported as saying that it took the bank’s management too long to drop a combative stance with regulators. In April, the bank’s two top regulators told JP Morgan CEO, Jamie Dimon, and his board that they had lost trust in management.
Another new headache for JP Morgan was the admission that regulators are also looking into compliance issues with specific rules dealing with mortgages received from the Federal Housing Administration (FHA). Similar action has also been taken against Wells Fargo & Company (NYSE:WFC), Bank of America, and Citigroup, Inc. (NYSE:C). Other banks that have disclosed investigations recently include U.S. Bancorp (NYSE:USB), SunTrust Banks Inc. (NYSE:STI), and PNC Financial Services Group Inc. (NYSE:PNC). The moves follow an announcement by the FHA in April that the program faced potential losses of $ 1 billion this year.
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