Major US banks are conducting massive examination of their compliance procedures that monitor trading activities in the aftermath of UBS’s rogue trading scandal in what compliance executives say is one of the largest bank-led examinations of internal compliance procedures, the FOX Business Network has learned.
The internal reviews, conducted by Bank of America (BAC), Citigroup (C) and JPMorgan (JPM), are being sparked at least in part by the expectation that federal and international securities regulators such as the US Securities and Exchange Commission, and Britain’s Financial Services Authority will soon conduct reviews of how well big banks monitor trading activities.
A spokesman for the SEC declined to comment; a spokesman for the FSA couldn’t be reached for comment.
Press officials at the three banks would not deny that they have launched reviews of compliance procedures following the disclosure earlier in the month that a trader at UBS conducted a series of what the bank called “unauthorized trades” leading to the loss of more than $2 billion.
The trades appeared to have escaped the Swiss bank’s compliance examiners, prompting a major management shakeup and the resignation of chief executive officer Oswald Grubel.
People close to Bank of America, Citigroup and JP Morgan tell the FOX Business Network that their reviews aren’t complete, though at least so far the banks believe their compliance procedures are adequate.
That said, the compliance reviews are said to be among the top priorities at these banks as they expect increased regulatory scrutiny of their trading practices and how they monitor those practices.
“I’m working all day and sometimes all night on this stuff,” a compliance executive at one bank told the FOX Business Network.
The big problem for the banks -- even if they find that their compliance procedures are strong -- is the growing concern among banking regulators that these banks might be too big and unwieldy for management to control. Firms such as JP Morgan, Citigroup and Bank of America combine both investment banking and commercial banking activities.
“A lot of stuff just falls through the cracks,” said a compliance official at one bank.
A spokeswoman for JP Morgan had no comment on the matter. A spokesman for Bank of America said that as “part of our normal course of business, we continuously assess and review our internal risk and compliance controls."
A Citigroup spokesman said: "We are constantly working to improve, manage and monitor the compliance and controls process."