JP Morgan will pay $100 million to settle with the US Commodities Futures Trading Commission over losses stemming from its “London Whale” trading debacle in 2012.
In a first, JP Morgan will admit that its traders acted “recklessly”.
The CFTC says the trades, which ultimately cost the bank $6 billion in losses, distorted prices in the market.
Last month, the bank agreed to pay $920 million to other regulators in the US and the UK over the bad trades.
JP Morgan will pay $100 million to settle with the US Commodities Futures Trading Commission over losses stemming from its “London Whale” trading debacle in 2012
The scandal arose from disastrous trades by former bank employee Bruno Iksil, who earned the nickname of the “London Whale” for his big bets on the financial markets.
David Meister, the head of enforcement at the CFTC, said in a statement that the traders tried “to <<defend>> their position by dumping a gargantuan, record-setting volume of swaps virtually all at once, recklessly ignoring the obvious dangers to legitimate pricing forces”.
The bank has found itself overwhelmed by mounting legal troubles lately.
Once the darling of Washington and Wall Street, it reported a rare quarterly earnings loss last week, mostly due to legal costs totaling $9.2 billion.
The bank lost $380 million during the quarter, compared with a profit of $5.7 billion in the same period last year.
JP Morgan says it has set aside a fund of $23 billion to deal with mounting legal costs relating not just to the “London Whale” trading debacle, but also to charges that the bank misled consumers and investors during the housing market collapse.
US media has estimated that JP Morgan could be negotiating a settlement of several billion dollars with a variety of US regulators.
An announcement of this settlement – surely the largest banking fine in US history – is expected to be announced soon.
JP Morgan Chase has agreed to pay four regulators $920 million relating to a $6.2 billion loss incurred as a result of the “London Whale” trades.
Under the settlement, $200 million will go to the US Securities and Exchange Commission (SEC) and $215 million to the UK’s Financial Conduct Authority (FCA).
As part of the deal JP Morgan admitted violating US federal securities laws.
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 deny charges of lying about the size of their trades in order to hide their mounting losses.
In a statement, the SEC said there had been failings in JP Morgan’s internal controls and in senior management.
The regulator said the bank – whose chief executive Jamie Dimon once described the trading problems as a “tempest in a teacup” – had admitted the facts underlying the SEC’s charges.
JP Morgan Chase has agreed to pay four regulators $920 million relating to a $6.2 billion loss incurred as a result of the “London Whale” trades
“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 will go to both the Securities and Exchange Commission (SEC) and the US Federal Reserve.
A further $215 million will be paid to the UK’s Financial Conduct Authority as part of the global settlement.
It 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.
“Senior management failed to respond properly to warning signals that there were problems.
“As things began to go wrong, the firm didn’t wake up quickly enough to the size and the scale of the problems. What is worse, they compounded this by failing to be open and co-operative with us as their regulator.”
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.
Jamie Dimon, whose “tempest in a teacup” comment in April 2012 prompted criticism he was underplaying the affair, said in a statement on Thursday the bank “accepted responsibility and acknowledged our mistakes from the start”.
“We have learned from [our mistakes] and worked to fix them. We will continue to strive towards being considered the best bank – across all measures – not only by our shareholders and customers, but also by our regulators,” he said.
“Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company.”