Saturday 22nd October 2016                 Change text size:

JP Morgan fined $920m by UK and US regulators over ‘London Whale’ cover-up

jp morgan chase by DragonFlyEye via Flickr

US investment bank JP Morgan Chase has been fined $920m (£573m) for concealing so-called ‘London Whale’ trades that led to losses of $6.2 billion.

Regulators in the US and UK confirmed on Thursday that the bank would be fined for “unsafe and unsound practices” that had the potential to undermine the trust and confidence” in the investment markets.

The fines relate to French-born trader, Bruno Iksil, nicknamed the ‘London Whale’, who is renowned within financial circles for his aggressive trading strategies, which often lead to huge profits. In May 2012, it was revealed that Iksil’s derivative trading strategy had created initial losses of $2 billion. JP Morgan is accused of covering up the extent of those losses, which now sit at $6.2 billion.

US regulators the Office of the Comptroller of the Currency (OCC) and the Securities Exchange Commission (SEC)  slapped the bank with $300m and $200m fines respectively, whilst the UK regulator, the Financial Conduct Authority (FCA), pitched in with a £138m penalty.

The FCA has heavily criticised JP Morgan for using high risk trading strategies whilst having poor controls and management over those risks. It described the incident as a “serious failing”.

Commenting on the fines, FCA director of enforcement Tracey McDermott said, “Maintaining the integrity of markets is a key part of our wholesale conduct agenda. We consider JP Morgan’s failings to be extremely serious such as to undermine the trust and confidence in UK financial markets.”

She also said the bank had “[failed] to be open and co-operative” with regulators.

Meanwhile, Andre Spicer, professor of organisational behaviour at City University London, remarked that the fine, reminds banks that they desperately need to change their ways or risk taking a huge hit not only their bottom line, but also their reputation.

He added, “With its recent profits, the bank can afford the fine. But the damage to its reputation could be more costly in the long-term.”

JP Morgan’s fine is the second largest in UK financial services history, and the third largest in the US.

Further reading:

Barclays faces £50m fine for acting ‘reckless’ in Qatar bailout

AXA Wealth fined for advice ‘failings’

Big banks to pay out £1.3bn to consumers mis-sold credit card insurance

Banking regulator fines RBS £5.6m for inaccurate transaction reporting

Oil trader fined £3m for manipulation by US and UK regulators

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