JPMORGAN CHASE WHALE TRADES: A CASE HISTORY OF DERIVATIVES RISKS AND ABUSES

with OCC oversight. The OCC has begun that effort by issuing the Cease and Desist order,
multiple Supervisory Letters requiring corrective action, and a downgrade of the bank’s
management rating, but more may be needed.
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A. Overview of OCC’s Oversight Role
Because JPMorgan Chase Bank, N.A. holds a national charter, its primary federal
regulator is the OCC which oversees all nationally chartered banks in the United States. 1196 The
OCC does not supervise the bank’s holding company, JPMorgan Chase & Co., which is overseen
primarily by the Federal Reserve. Nor does the OCC supervise the holding company’s non-bank
affiliates like J.P Morgan Broker-Dealer Holdings, J.P. Morgan Ventures Energy Corp, or Bear
Stearns Companies, LLC, which are overseen primarily by the SEC. Since the Chief Investment
Office (CIO) sits within the national bank, however, the OCC is the regulator with primary
responsibility for supervising the CIO’s activities. 1197
Within the OCC, the Large Bank Supervision division, which typically regulates banks
with assets of $50 billion or more, provides supervisory personnel to oversee JPMorgan
1198
Chase. The OCC has assigned approximately 65 OCC examiners and related personnel to
JPMorgan Chase; all are physically located at the bank. 1199 The OCC supervisory team conducts
both ongoing supervision, such as monitoring routine reports to the bank’s board, management,
and audit function, as well as regular reviews of the bank’s business performance, risk trends,
and regulatory compliance. Also, the OCC conducts a continuous examination program at the
bank, which consists of approximately 60 examinations each year targeting specific areas of
operation at the bank, with each lasting approximately three to six weeks. 1200
At the end of each examination, the OCC issues a Supervisory Letter to the bank’s senior
management to communicate examination findings, and if appropriate, requirements or
recommendations for improvements. If a Supervisory Letter identifies an apparent violation of
law or a “Matter Requiring Attention” (MRA), the OCC requires the bank to promptly respond
and remedy the problem. If the Supervisory Letter includes a “recommendation,” the OCC
encourages, but does not require, corrective action by the bank. In addition to Supervisory
Letters, the OCC issues an annual Report on Examination summarizing its examinations over the
prior year, provides a copy to the bank’s board of directors, and meets with the board members
on at least an annual basis to discuss specific concerns.
The OCC’s examination effort at each national bank is headed by an Examiner-in-
Charge, and includes on-site examination staff, risk analysis division staff, and economic
1196
See “About the OCC,” OCC website, http://www.occ.gov/about/what-we-do/mission/index-about.html.
1197
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012); see also Subcommittee interview of Julie
Williams, OCC (9/13/2012).
1198
Subcommittee briefing by OCC (7/30/2012).
1199
See 7/30/2012 OCC Large Bank Supervision presentation to Subcommittee re Chief Investment Office
Discussion, at PSI-OCC-06-0000009; Testimony of Thomas J. Curry, Comptroller of the Currency, “Implementing
Wall Street Reform: Enhancing Bank Supervision and Reducing Systemic Risk,” before the Senate Committee on
Banking, Housing, and Urban Affairs, S.Hrg. 112-____ (June 6, 2012), at 26.
1200
See 7/30/2012 OCC Large Bank Supervision presentation to Subcommittee re Chief Investment Office
Discussion, PSI-OCC-06-0000011.