JP Morgan to pay $920m penalties over ‘London Whale’

The penalties include $300m to the US Office of the Comptroller of the Currency, $200m to the Federal Reserve, $200m to the US Securities and Exchange Commission and £137.6m to the UK’s Financial Conduct Authority. The regulators’ citations focus on failures in risk management and financial reporting systems.

The biggest US bank was also cited for failing to tell its board of directors and regulators about deficiencies in its risk management systems that had been identified by management.

The settlements are a major milestone in the drive by JP Morgan chief executive Jamie Dimon to resolve legal issues weighing on the bank, but leave unresolved a probe by US prosecutors into the derivatives debacle.

The ‘London Whale’ derivatives losses last year totalled $6.2bn.

Mr Dimon, in a statement issued by the company, said: “We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them.”

Bruno Iksil, the trader whose large bets earned him the nickname ‘London Whale’, has signed a co-operation agreement with prosecutors and has not been charged with any wrong- doing.

JP Morgan also faces other investigations into areas that include possible bribery in hiring practices in China and potentially fraudulent sales of mortgage securities.

JP Morgan has been under intense scrutiny from the US government since May 2012, when Mr Dimon disclosed that the firm was losing billions of dollars on derivatives deals that had been questioned a month earlier in press reports.

Mr Dimon initially criticised those reports as a “tempest in a teapot”.

He has repeatedly apologised for that remark and said the bank was “stupid” in handling the trades from a London desk of the bank’s Chief Investment Office.

The bank was criticised for a high-risk trading strategy, weak management, a poor response to the problems and failing to co-operate with regulators.

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 prob- lems.

“What is worse, they compounded this by failing to be open and co-operative with us as their regulator.”