Outlook The £33m fine handed down by the Financial Services Authority to JPMorgan yesterday is quite some punishment, but it fits the crime. Astonishingly, for almost seven years this bank failed to keep the money of some clients separate from its own. At one stage, $23bn of customers' money was not held in segregated accounts.
This means that at any given moment during that seven-year period, clients' money would have been at risk if JPMorgan had become insolvent. And while there might have been a time when the prospect of such a well-known investment bank collapsing would have been too outlandish to contemplate, JPMorgan continued to break the rules even after Lehman Brothers had gone under. That the FSA concedes this case was a result of cock-up rather than conspiracy is not much of a mitigation. It is hardly reassuring to hear that one of the world's biggest banks was incompetent enough not to notice that for almost seven years billions of dollars worth of customers' money was being put at risk in a blatant contravention of the regulatory requirements.
And even now JPMorgan is not exactly brimming with contrition. It may have co-operated with the FSA's inquiry, but yesterday it would not say a word publicly about the case – there was not even a written statement expressing its regret. This is apparently its standard policy.
As for the City as a whole, do not assume this was an isolated case. The FSA says one reason why it has imposed a record fine is to get the attention of other City institutions that hold clients' money – it is already investigating "several more cases" of similar failings.
We hear lots about the dangers of a regulatory backlash following the credit crisis, not to mention the need to pay bankers huge sums to secure their precious services. But the failing identified at JPMorgan – and, it seems, other City firms – is about as basic as you get. These banks can't even get the simple things right.