JPMorgan Chase Chief Executive Officer Jamie Dimon stepped down as chairman of the banks main operating subsidiary in July because of a recommendation by the Office of the Comptroller of the Currency, according to two people with knowledge of the matter.
The agency asked for the change as part of an effort to improve corporate governance at the company, said one of the people, who asked not to be identified because discussions were confidential. The move wasnt punitive, that person said. Robert Garsson, an OCC spokesman, declined to comment on the talks.
Dimon stepped down as chairman of the subsidiary July 1, a person with direct knowledge of the move said on Oct. 3. When asked about the situation during a conference call with reporters last week, the CEO referred to talks with government supervisors without specifying whether any request was made.
We are in constant dialogue with our regulators regarding how to strengthen our governance and controls, he said on the Oct. 11 call to discuss the banks earnings. We thought this board change we made was consistent with our regulators views and governance for a banking subsidiary.
The move didnt affect Dimons titles as chairman and CEO of the parent company. Shareholders backed him in a May vote against splitting those roles after U.K. traders in the firms chief investment office lost as least $6.2 billion on botched derivatives bets last year. The New York-based lender has said it boosted spending on internal controls by about $1 billion, reassigned at least 5,000 workers to compliance and overhauled corporate governance, adding new members to its board.
We also looked at all other subsidiaries and found out this was an outlier, Dimon said last week about giving up his title at the unit. I wasnt on any of the other boards. We thought we should adopt the same approach here.
The OCC is the primary regulator of the national bank unit while the Federal Reserve oversees the parent company. The OCC downgraded a rating of the JPMorgan Chase Bank NA units management in July 2012, according to a March report by the Senate Permanent Subcommittee on Investigations. The agency cited lax governance and oversight in the chief investment office.
Management effectiveness is one of six components of a banks so-called Camels rating, a confidential measure the OCC uses to monitor firms safety and soundness. The grading system, using a 1-to-5 scale, also tracks capital, asset quality, earnings, liquidity and sensitivity to market risk.
The March Senate report didnt specify the management rating at the time. The grade was lowered to 3 from 2, the Wall Street Journal reported that month, citing unidentified people familiar with the assessment.
JPMorgan has sought in the past few months to resolve probes into the derivatives bets and into businesses including energy trading, credit-card lending and bundling of mortgages into bonds. The bank said Oct. 11 it took a $7.2 billion charge for expenses tied to regulatory matters and litigation, leading to its first quarterly loss during Dimons tenure.
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