Comments of Inspector General re supervising JPMorgan

The Inspector General of the Fed has published a report of FRB New York's supervision of JPM. Its basic conclusion: "The Board Should Enhance Its Supervisory Processes as a Result of Lessons Learned From the Federal Reserve’s Supervision of JPMorgan Chase Company’s Chief Investment Office."

The bases for this conclusion are:

there was a missed opportunity for the consolidated supervisor and the primary supervisor to discuss risks related to the CIO and to consider how to deploy the agencies’ collective resources most effectively.
Second, we found that Federal Reserve and OCC staff lacked a common understanding of the Federal Reserve’s approach for examining Edge Act corporations. In our opinion, this disconnect could result in gaps in supervisory coverage or duplication of efforts.
Third, we found that FRB New York staff were not clear about the expected deliverables resulting from continuous monitoring activities. Enhanced clarity concerning the expected deliverables could improve the effectiveness of this supervisory activity.
Finally, we found that FRB New York’s JPMC supervisory teams appeared to exhibit key-person dependencies. In our opinion, these dependencies heightened FRB New York’s vulnerability to the loss of institutional knowledge.