A former JPMorgan Chase employee is accusing America’s largest lender of systematically misreporting key indicators that the Federal Reserve uses to determine the amount of capital reserves that banks must maintain.
According to a report by the International Consortium of Investigative Journalists (ICIJ), a former JPMorgan Chase employee-turned-whistleblower alleges the bank has understated complexity indicators to its capital reserves level since 2016.
The complexity indicators, which include the total value of the underlying assets of a bank’s derivatives, the securities available for sale and trading as well as the illiquid and hard-to-value assets, are used by the Federal Reserve to gauge the risk posed to the global financial system by the top-eight largest US lenders.
The indicators are essential in the Fed’s calculations to determine the extra capital that each of the large banks must hold over and above the minimum stipulated to provide a buffer in the event of financial shocks.
According to the ICIJ report, the issue of misreporting complexity indicators was raised within JPMorgan Chase in 2018 but the whistleblower and others were retaliated against and fired four years later. Several whistleblower complaints were also filed with the U.S. Securities and Exchange Commission (SEC) and the Federal Reserve in 2022, per the report.
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