Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

Business News

JP Morgan chief pins blame for $6bn loss on London traders

They hid the true risks from me and ruined my career, says ex-investment officer Ina Drew

The former JP Morgan executive at the heart of the Wall Street bank's $6.2bn (£4.1bn) trading loss in 2012 has pinned the blame on the company's London office.

Ina Drew, the bank's former chief investment officer, claimed its risk models were not up to scratch and that London-based staff hid information from her.

Appearing before a US Senate Committee yesterday, she said her oversight of the trading unit she ran was "reasonable and diligent", claiming she had no knowledge that some trades were inflated.

"I did not, and do not, believe I bore personal responsibility for the losses," she said.

"Some members of the London team failed to value positions properly and in good faith minimised reported and projected losses, and hid from me important information regarding the true risks of the book.

"The fact that these mistakes happened on my watch has been the most disappointing and painful part of my professional career."

Ms Drew's comments came almost a year after news of the disastrous trades was first reported last May. She retired from the bank shortly after.

A millionaire City trader known as the "London Whale" for the vast size of his bets on the markets quickly emerged as the culprit.

Bruno Iksil, who was also known in trading circles as Voldemort – the Harry Potter bogeyman who is referred to in the fantasy novels as "He who must not be named" – built up huge losses by betting on the creditworthiness of big companies. The size of his loss was only exposed after the bank took an audit of its trading books.

On Thursday the Senate committee issued a report which said that JP Morgan had ignored risks, misled investors and fought with financial regulators.

"We found a trading operation that piled on risk, ignored limits on risk-taking, hid losses, dodged oversight and misinformed the public," Carl Levin, the subcommittee's chairman, added.

In a statement released in response, JP Morgan said: "While we have repeatedly acknowledged mistakes, our senior management acted in good faith."

The "London Whale" loss has left a lasting effect on what was once viewed as Wall Street's safest bank.

Jamie Dimon, the group's chief executive, lost his crown as Wall Street's highest-paid bank boss last year as a result of the trading blunder.

Although the bank's profits rose by more than 50 per cent during the final quarter of 2012, Mr Dimon's pay package plummeted after the company's directors concluded that he bore "ultimate responsibility for the failures" connected to the ill-fated bets placed by Mr Iksil.

Senator John McCain from Arizona, the leading Republican on the Senate panel, yesterday questioned why Ms Drew and others were transferring blame. "It seemed that the traders seemed to have more responsibility and authority than the higher-up executives," he said.