JPMorgan to pay $920-mn fine over 'London Whale' scandal
20 September 2013
US investment bank JPMorgan Chase & Co on Thursday agreed to pay four regulators $920 million in connection to a $6.2 billion loss incurred by it as a result of the "London Whale" trading scandal.
The settlement reached with America's largest bank is the third-biggest banking fine by US regulators, and the second biggest by UK regulators.
As part of the deal, JPMorgan admitted violating US federal securities laws.
The settlement comes after JPMorgan Chase chief executive Jamie Dimon last year dismissed the scandal as a "tempest in a teapot".
Traders at JP Morgan's London office built up huge losses in derivatives trades at the beginning of last year.
Two former JP Morgan traders face criminal charges in the US relating to the case. They have denied charges of lying about the size of their trades in order to hide their mounting losses.
In a statement, the US Securities & Exchange Commission (SEC) said there had been failings in JP Morgan's internal controls and in senior management.
The regulator said the bank had admitted the facts underlying the SEC's charges.
"JP Morgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses," said George Canellos, co-director of the SEC's division of enforcement.
The Wall Street firm, one of the biggest investment banks in the world, is paying $300 million to the US office of the Comptroller of the Currency (OCC), and $200 million each to the SEC and the US Federal Reserve.
A further £138 million will be paid to the UK's Financial Conduct Authority as part of the global settlement.
The SEC said JP Morgan's conduct "demonstrated flaws permeating all levels of the firm: from portfolio level right up to senior management".
Tracey McDermott, the FCA's director of enforcement and financial crime, said the failings had undermined trust and confidence in the UK's financial markets.
"This is yet another example of a firm failing to get a proper grip on the risks its business poses to the market," she said.
JPMorgan will be hoping that the settlement means it can put the London Whale debacle behind it and start re-building its reputation.
Yet according to a BBC report people at the New York Stock Exchange have barely registered the news of the massive fine. Shares have made very little movement, and some traders on the NYSE find the story boring.
The fines were expected and JP Morgan has steadily been setting money aside for the financial punishment it knew was coming.
As long as the bank continues to make money for investors, the reaction will continue to be muted, suggests the BBC.
The London Whale was the name given to then-JP Morgan derivatives trader Bruno Iksil, who is believed to have racked up the losses and is now co-operating with authorities in criminal cases against other traders.
The bank's chief investment officer, Ina Drew, stepped down following the revelation of the losses in 2012.
Dimon said in a statement on Thursday that the bank "accepted responsibility and acknowledged our mistakes from the start".