US bank JP Morgan Chase will pay regulators £572m due to a $6.2bn loss resulting from high-risk trades dubbed the ‘London Whale trades’ and weak management.
“We consider JPMorgan’s failings to be extremely serious such as to undermine the trust and confidence in UK 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. There were basic failings in the operation of fundamental controls over a high risk part of the business. Senior management failed to respond properly to warning signals that there were problems in the CIO. JP Morgan Chase agreed to pay the sum to four regulators,” said Tracey McDermott, the Financial Conduct Authority’s director of enforcement and financial crime, one of the regulators who fined the bank.
The FCA, which fined JPMorgan £137,610,000 for serious failings related to its Chief Investment Office (CIO), said: “JPMorgan’s conduct demonstrated flaws permeating all levels of the firm: from portfolio level right up to senior management, resulting in breaches of Principles 2, 3, 5 and 11 of the FCA’s Principles for Businesses - the fundamental obligations firms have under the regulatory system.
The settlement is the third biggest banking fine by US regulators, and the second largest by UK regulators.
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. 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.
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