Dimon memo outlines simplified JPMorgan structure

Jamie Dimon told staff that 'simplifying' JPMorgan Chase was at the forefront of the bank's response to a wave of regulatory probes, ahead of a settlement for the 'London whale' trading episode.

Amid increasing concern in Washington that some banks are "too big to manage", the JPMorgan chief executive told staff that getting rid of non-core business units, especially those with legal or regulatory risks, was a "key initiative".

The USD 6 billion losses incurred in last year’s trading debacle have helped stoke calls that banks including JPMorgan, which employs 260,000 people, should be broken up. The losses occurred in an obscure credit portfolio that received scant attention from analysts and supervisors.

Mr Dimon said JPMorgan's attempt to sell its physical commodities business and a decision to stop selling student loans were part of the switch to a simpler structure. In June, the bank also spun off its private equity arm, One Equity Partners.

He said JPMorgan was "conducting an in-depth review of our foreign correspondent banking business" – an area that has brought anti-money laundering scrutiny to the industry – amid concern that infractions in remote regions of the world could rebound to the bank’s headquarters.

"We are also proactively trying to decrease the number of vendors we have, which reduces complexity in our business and creates more jobs internally," he said, a move that goes against a trend for banks to outsource services and shows the desire to impose more control.

However, insiders said that the company was not planning more drastic moves to hive off larger divisions and that “simpler” did not mean 'smaller'. One executive noted the company was able to absorb the USD 6 billion losses partly because of its size and relative capital strength.

In the memo to employees, Mr Dimon also said that the company had added 3,000 staff to bolster the bank’s controls, devoted 500 people to fulfilling Federal Reserve 'stress tests', and given staff 750,000 hours of training on compliance matters.

"We have increased our total spend on controls by about USD 1 billion this year," Mr Dimon wrote.

"Never before have we focused so much time, effort, brainpower, technological power and money on a single, enterprise-wide objective ... Make no mistake – we are going to get this right."

His comments to staff come as JPMorgan is in talks to pay more than USD 800 million to settle with securities and bank regulators over activities behind the London whale trading loss. It also faces additional fines from US derivatives regulators which are not part of the current pact, people familiar with the matter said on Monday.

Two weeks before the end of the third quarter, Mr Dimon said the "business continues to be strong", citing "groundbreaking transactions" in capital markets – which include a role in managing the sale of Verizon’s giant bond offering.