NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) plans to spend an additional $4 billion and commit 5,000 extra employees to fix risk and compliance issues after a slew of investigations by regulatory authorities, the Wall Street Journal reported on Thursday.
JPMorgan will spend $1.5 billion on managing risk and complying with regulations and plans to add $2.5 billion to its litigation reserves in the second half of the year, the Journal reported.
The bank will also increase its risk-control staff by 30 percent, the WSJ said, citing people familiar with the matter.
JPMorgan said on Monday that it would add more than $1.5 billion to its legal reserves in the third quarter and 3,000 people had been added to control functions.
Another 2,000 assigned to the bank’s various business lines are also working on compliance issues, a person familiar with the matter who would not provide the total cost told Reuters.
Chief Executive Jamie Dimon said in April in his annual letter to shareholders that the bank’s first priority had become fixing its control and compliance issues. He warned then that the company was forgoing some business investment projects to do the work.
On Monday, the company called the effort “unprecedented” and said it now involves 23 different work streams, including remedial work on the capital plan it had submitted to the Federal Reserve earlier this year and actions the government ordered in January to fix its controls, abide the Bank Secrecy Act and fight money laundering.
The Journal quoted Dimon as saying in an interview that the work “will make us stronger in the long run.”
JPMorgan has been under intense scrutiny from regulators since May 2012 when Dimon announced that the company was losing billions of dollars in a corporate office in London on derivatives trades that were far worse than he knew.
Dimon initially called news reports of possible losses by a trader known as the “London Whale” a “tempest in a teapot”. The positions ultimately cost more than $6.2 billion.
Since the derivatives debacle, the U.S. Department of Justice, the Securities and Exchange Commission and other government agencies have developed investigations into subjects including energy trading, possibly bribery in hiring practices in China, possibly fraudulent sales of mortgage securities.
The multiple probes are driving the higher costs for litigation, the company said on Monday. Chief Financial Officer Marianne Lake said then that the legal tab was still being calculated and promised to provide more details when the company next reports quarterly results on October 11.
The company spent about $5 billion, pre-tax, on litigation in each of the past two years.
This year JPMorgan’s legal costs are likely to reach similar levels, analyst Charles Peabody of Portales Partners has said.
JPMorgan reported $21.3 billion in net income for 2012.
Reporting by Lauren Tara LaCapra and David Henry in New York; Editing by Jean Yoon