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JPMorgan's Dimon says he did not mind risk change

Source : REUTERS
Last Updated: Thu, Jun 14, 2012 03:52 hrs
Jamie Dimon is surrounded by security at the end of the U.S. Senate Banking, Housing and Urban Affairs Committee hearing in Washington

JPMorgan Chase & Co CEO Jamie Dimon said on Wednesday he received a copy of a January memo about a new risk model at the center of the bank's $2 billion-plus loss on derivatives trades, but had not paid attention.

Dimon, speaking in a CNBC-TV interview minutes after testifying before Congress, added that the losses probably would have happened even without the change in the model. He said such models can be poor tools for managing risk.

"I was copied on a memo that said there was a change in the VaR model, so that is going to come out," Dimon said. "I paid virtually no attention to it."

Banks use so-called value-at-risk models as a tool for keeping traders from taking too much risk. The models are also required by bank regulators and the Securities and Exchange Commission to provide indications of how much money banks could lose in the capital markets.

A model in JPMorgan's Chief Investment Office was changed in the middle of January at the same time the group embarked on a trading strategy that Dimon has said was badly flawed. The new model indicated at the end of March that the group's risk-taking had been steady since December. But the previous model showed the risk had doubled, the company said on May 10, when Dimon disclosed the $2 billion loss.

Dimon said he did not learn before late April that new model was badly flawed.

Dimon told CNBC the model change had been approved by an internal committee and not by him.

"Those models have an independent review process," he said.

"We do not believe that this was done nefariously" so that traders could take more risk.


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