JP Morgan sought to conceal from regulators the scale of risks it took that left America's biggest bank with a $6bn (pounds 4bn) trading loss, a scathing report from the US Senate claims.
JP Morgan sought to conceal from regulators the scale of risks it took that left America's biggest bank with a $6bn (£4bn) trading loss, a scathing report from the US Senate claims.
In the first major investigation into the so-called "London Whale" scandal, executives at the bank are accused of omitting key data from reports to its US regulator as losses mounted last year. Jamie Dimon, the bank's chief executive, described the losses as a "tempest in a teapot" in early April, even though he knew that losses from a complex series of wagers on credit derivatives - known as a synthetic credit portfolio (SCP) - had escalated during March, the report notes.
JP Morgan executives will be grilled by the Senate committee today (Friday) on the losses that were racked up in London and helped reignite the debate in America over whether the reform since the financial crisis has done enough to make the banking system safer.
The bets taken by the London arm of JP Morgan's chief investment office (CIO), a division tasked with investing the bank's surplus deposits, were so large that one of the traders involved, Bruno Iksil, was quickly dubbed the "London Whale". His lawyers have reportedly denied any wrongdoing by him.
The trades "created a runaway train that barrelled through every risk barrier," Carl Levin, the head of the Senate Permanent Subcommittee on Investigations that produced the report, said yesterday. "Values [on trading books] were manipulated to hide losses; risk limits were ignored; the public was misinformed and oversight was dodged."
According to the 307-page report, in January last year executives from the CIO misformed its regulator, the Office of the Comptroller of the Currency, by telling officials that they intended to reduce the size of the trades. Instead, the dealers embarked on a "trading spree".
Although JP Morgan shares have recovered from their plunge after Mr Dimon disclosed the scale of the losses in May last year, the bank still faces a wave of lawsuits from investors who allege they were misled. "While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone," a spokesperson for JP Morgan said.
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