J.P. Morgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon has finally addressed shareholders directly with details on the London Whale incident, which lost the bank billions of dollars in 2012. In the bank’s annual letter to JP Morgan shareholders, Dimon called it “extremely embarrassing.”
Dimon said that the bank’s top priority is its control and regulatory agenda and that they learned a lot from JP Morgan’s London Whale loss. He said the bank is working on getting into compliance with “several hundred rules,” including those from Dodd-Frank, Basel, Brussels and the U.K.’s Financial Services Authority.
He also said they would be meeting multiple times with regulators to share information and hear their criticisms about what the bank is doing and the changes it’s making.
“We learned—or were painfully reminded of—hard lessons from the London Whale problem,” he wrote.
Jamie Dimon went on to say that it was the “stupidest and most embarrassing situation he had ever been a part of.” He said that it’s critical that they learn from the mistake and that he takes personal responsibility for the incident. He also apologized and listed some of the lessons they learned or were reminded of from the incident.
First, he said that they learned to “fight complacency.” According to Dimon, the portfolio’s past success meant they had become complacent, and when they developed a new strategy for it in 2011, their plan was “flawed, complex, poorly reviewed, poorly executed and poorly monitored.”
He also highlighted several times throughout the letter the need for employees to report problems or violations they see. He said sometimes people try to avoid conflicts, but that occasionally conflicts are needed in order to prevent problems like the London Whale incident.
In addition, Dimon said it’s important that the controls match the risks involved. “We should have had more and very specific rules and requirements around the synthetic credit portfolio—but we didn’t,” he wrote. “Tighter and more appropriately specific limits could have caught the problem earlier and reduced its impact.”
He also assured shareholders that J.P. Morgan Chase & Co. (NYSE:JPM) “took strong action with those who were directly and indirectly involved.” He said they replaced the management team and recaptured more than $100 million in previously granted awards.
Dimon even thanked the senior employees of the bank who volunteered to step in and help fix the problem and limit the damage.
“We can’t thank them enough,” he wrote. “A company built on individuals like that is built to last.”
According to Dimon’s letter, J.P. Morgan Chase & Co. (NYSE:JPM) is committed to becoming “a port of safety in the next storm” and “the safest and soundest bank on the planet.”