In JPMorgan Chase Report, Worrying Admissions and Ideas for Improvement

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The group Sisters of Charity of Saint Elizabeth has pushed banks like JPMorgan to improve practices in corporate governance.Credit Eduardo Munoz/Reuters
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JPMorgan Chase is following Goldman Sachs’s lead by baring some of its soul. The bank, run by Jamie Dimon, unveiled a 96-page publication last week titled “How We Do Business – The Report.” Like its rival’s business standards review almost four years ago, the volume is laden with P.R.-speak, along with some worrying admissions and much-needed improvements.

The idea for the report came not from Mr. Dimon’s office, but from shareholders led by the Sisters of Charity of Saint Elizabeth. In recent years, this group has pushed banks like JPMorgan and Bank of America to improve practices in corporate governance and disclose more.

There aren’t too many similarities with Goldman’s 2011 effort. That’s in part because JPMorgan did some things better already – it has a deserved reputation for clearer financial reporting than most, for example. One thing that seems to be lacking, though, is any explicit input from clients, whereas Goldman commissioned an independent survey as part of its review.

In addition, Goldman used its eight-month process to come up with recommendations. JPMorgan, on the other hand, is mostly laying out what it has already done.

This includes beefing up risk-management procedures and ensuring that a group responsible for valuing some assets and liabilities now covers the bank’s entire holdings. In addition, the report lays out how much extra the bank spent this year – $1.7 billion – and how many extra employees it has added since 2012 – 16,000 – to improve its compliance and control efforts.

Earlier this year, the firm also set up what it is calling the SDX (shareholder-director exchange) Protocol. That’s because directors seemed too cozy with Mr. Dimon and inattentive to investors after the so-called London Whale trading fiasco that cost the bank around $6 billion.

JPMorgan reveals some worrying bloopers, too, such as discovering it needed to overhaul control processes for its dealings with foreign banks.

There’s always more to do. For instance, the recent hack of the bank’s systems may have been made easier by a neglected server for which security hadn’t been upgraded, as DealBook reported this week. The report is promising to build a “fortress technology foundation” to bolster its cybersecurity. Those steps, the rest of the report and JPMorgan’s actions should settle investors’ nerves somewhat. Of course, that also means that future failures will be harder to explain away.

Antony Currie is an associate editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.