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JPMorgan risk management system is broken, regulator says

JPMorgan Chase showed "serious risk management weaknesses," according to a rec

Financial giant JPMorgan Chase, which lost more than $2 billion in a much-publicized trading fiasco recently, may have risk management issues that extend beyond the office from which the losses stemmed,

Financial giant JPMorgan Chase, which lost more than $2 billion in a much-publicized trading fiasco recently, may have risk management issues that extend beyond the office from which the losses stemmed, according to a report from the Los Angeles Times.

The Office of the Comptroller of the Currency, the regulatory agency responsible for overseeing institutions including JPMorgan, recently told the House Financial Services Committee that an OCC inquiry showed "serious risk management weaknesses at the bank," the source reported. Speaking before the committee, Comptroller of the Currency Thomas J. Curry said his agency would continue its investigation into the actions at the bank, and determine both the root cause of this failure and whether any other weaknesses are present.

Curry blamed his agency's inability to curtail risky trading at JPMorgan on the firm's shoddy financial reporting. According to Curry, if the financial reports were better prepared and contained actual information regarding the operations at JPMorgan, his office could have been able to identify the risks of their operation. 

Recently, Forbes released an analysis of the situation at JPMorgan and determined that, through "poor design, execution and monitoring, a refiguring of [Value at Risk], and the fact that the flawed transaction may not have been a hedge," the firm may have broken some provisions of the Sarbanes-Oxley Act, which is designed to prevent such losses through tighter financial reporting standards.