UPDATE 2-Wachovia reviewing risk process, to cut jobs

(Recasts with news of review, changes dateline to BOSTON previous NEW YORK)

BOSTON, May 12 (Reuters) - U.S. bank Wachovia Corp (WB.N: Quote, Profile, Research), battered by mounting losses from mortgages and other debt and facing increasing regulatory scrutiny, is undertaking an independent review of its risk and compliance processes and cutting jobs, Chief Executive Ken Thompson said on Monday.

"We are initiating a through review of systems, controls, processes, procedures and people by a third party group so that we can we can come forward and say this is a company in control and a company that can perform," Thompson told analysts at a banking conference sponsored by UBS AG (UBSN.VX: Quote, Profile, Research) in New York, which was monitored by webcast.

Over the past month or so, the fourth-largest U.S. bank has cut its dividend, reported a first-quarter loss it later nearly doubled to $708 million and faced up to $1.14 billion of costs for legal and regulatory problems.

Mounting loan losses also helped push Wachovia to raise $8.05 billion of capital last month. A Wall Street Journal report said federal prosecutors are investigating Wachovia in a probe related to alleged laundering of drug proceeds.

Wachovia also said in a filing with the U.S. Securities and Exchange Commission that it received inquiries and subpoenas from the SEC and several state regulators asking for information about underwriting and sale of auction rate securities. The firm was also named in a civil lawsuit by holders of these securities, it said.

Thompson, who last week gave up the role of Wachovia chairman to focus on day-to-day operations, said the review of the firm's processes will begin this week and will "probably take three to four months."

"We have not yet chosen who will do it but it will be an outside source. We will take the results from that and make changes to the company," he said.

The Wachovia CEO said losses in the firm's option-arm and home-equity loans portfolio will rise. He said the bank was cutting back corporate and investment bank jobs to reduce costs amid the ongoing market slump.