American and British regulators have imposed a fine of US$920 million (£572 million) on JP Morgan Chase over the ‘London Whale’ derivatives scandal which led to the bank racking up US$6 billion in legal losses.
The fine was made up of a £137.6 million by the UK’s Financial Conduct Authority (FCA), the US Securities and Exchange Commission (SEC) imposed a fine of $200 million, the Office of the Comptroller of the Currency fined the firm US$300 million, and the Federal Reserve levied a fine of US$200 million.
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Regulators said the bank had admitted wrongdoing for the scandal, which originated from its chief investment office in London.
The settlement is the third biggest banking fine by US regulators, and the second largest by UK regulators.
In May 2012, Bruno Iksil, nicknamed the "London Whale" for his preference for huge trades, and his colleagues at the London unit of JPM’s chief investment office (CIO) lost US$6.2 billion through bad bets in a portfolio that was specifically designed to hedge the bank’s risk exposure.
This prompted an investigation by several US authorities and the bank’s CEO Jamie Dimon explained to the US senate why he didn’t ensure that the CIO’s risk managers adequately kept pace with the nature of the unit’s business.
The FCA’s director of enforcement and financial crime Tracey McDermott said JP Morgan "failed to get a proper grip on the risks its business poses to the market". She said: "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."
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By GlobalDataOn 13 September, PBI reported that JP Morgan is planning to spend an additional US$4 billion and commit 5,000 extra employees to fix risk and compliance issues after a slew of probes by regulatory authorities.
