NEW YORK — JPMorgan Chase’s Chief Executive Jamie Dimon will get his pay cut by half because of a trading loss that cost the bank more than $6 billion last year and drew sanctions from federal regulators.
The bank, the country’s biggest by assets, said it would cut Dimon’s pay to $11.5 million for 2012, consisting of $1.5 million in salary and restricted stock awards of $10 million. That’s less than half last year’s pay of $23 million, which made him the highest-paid chief executive of any of the country’s mega-banks.
The loss, which was related to complex investments known as credit derivatives, tarnished the bank’s reputation as a scrupulous manager of risk and marked a personal setback for Dimon, a longtime critic of efforts to clamp down on regulatory oversight of major U.S. financial institutions. Dimon appeared twice before Congress to apologize and explain how the losses came about.
The bank released two internal reviews on the same day that it reported a 55 percent jump in earnings for the fourth quarter of 2012. The bank’s board of directors concluded that the loss was “a serious mistake,” but it praised Dimon for his response, which included shutting down the division that was responsible for the loss and getting rid of top managers.
Dimon, speaking on a conference call with reporters, said the trading loss is “very close to being a non-issue from a trading point” of view, though he also noted that the trading loss could bring the bank more regulatory headaches.
“Companies have problems,” Dimon said. “The problem embarrassed us. We’re fixing it.”
Dimon had initially dismissed concerns about the loss before its full scale was known last year, referring to them as a “tempest in a teapot.”
On Monday, the Federal Reserve and the Office of the Comptroller of the Currency, both bank regulators, slapped sanctions on JPMorgan for the trading loss and ordered it to tighten up its risk management procedures. JPMorgan, which neither admitted nor denied wrongdoing in the order, says it is working hard to correct any problems.
In its report, the bank’s board of directors criticized the former leaders of the group responsible for the loss, the Chief Investment Office, saying they did not keep the board informed of potential problems and had used unapproved models for calculating risk.
More regulatory sanctions could be in store.
JPMorgan’s fourth-quarter earnings shot up 55 percent over the same period a year ago. The bank made $5.3 billion after paying preferred dividends, compared with $3.4 billion this time a year ago.
The bank’s stock rose 15 cents to $46.50 in early trading.