JPMorgan Chase (JPM), which is under enormous regulatory pressure in the U.S., is planning to dial back its ties to potentially-risky business clients such as pawn shops, check cashers and payday lenders.
The efforts to remove certain business clients comes as part of a broader push at the largest U.S. bank to increase its oversight due to the onslaught from regulators examining everything from hiring practices in China to alleged manipulation in the energy markets.
According to a person familiar with the matter, JPMorgan is reviewing its commercial-lending clients in an effort to eliminate relationships with companies that pose a greater risk of fraud or money laundering and are viewed as risky to the bank’s reputation.
The review of business clients is focusing on relationships where JPMorgan may not have comfort and visibility into their business practices, especially industries that rely heavily on cash transaction, the person said.
However, JPMorgan is not planning a full-scale exit from these industries, the person said.
While dialing back these ties could help JPMorgan on the regulatory front, it could also hurt the company's revenue.
According to The Wall Street Journal, which first reported the news, the bank is also discussing whether it should continue lending to gun companies in the wake of last year’s massacre in Newtown, Conn. Gun companies haven’t been added to the list of high-risk industries at this point and no ban on loans to them is in place, the paper said.
New York-based JPMorgan declined to comment on the news.
In addition to the direct pressure on JPMorgan to fix alleged compliance issues, regulators have more broadly pushed banks to redouble their efforts to improve anti-money-laundering controls.
Shares of lender slipped 0.16% to $50.78 Wednesday morning, leaving them up 15.5% on the year.