JP Morgan left reeling at $920m Whale fines

The banking giant faces further penalties as the UK regulator charges it £138m

JP Morgan has been landed with a massive, $920m (£570m) penalty for allowing a its "London whale" trader to run up multi-billion dollar losses from its City offices.

The affair – at one time dismissed by chief executive Jamie Dimon as "a tempest in a tea cup" – saw a bank which once enjoyed a peerless reputation on Wall Street joining the likes of HSBC, Barclays and Royal Bank of Scotland in the gutter.

Further investigations are ongoing in the US, and it is believed that UK regulators also have unfinished business with the affair, which saw JP making losses of more than $6bn through enormous trades in credit derivatives, a type of insurance taken out on corporate or national debt.

These could see individuals punished. In the US charges have already been filed against two London traders, Javier Martin-Artajo, who oversaw trading strategy at JP's London base, and Julien Grout.

The penalty – which was imposed by four separate regulators including Britain's Financial Conduct Authority (FCA) yesterday – is the second-biggest imposed upon a bank, being eclipsed only by the $1.9bn that US watchdogs made HSBC pay for allowing itself to be used as a conduit for drug money and sanctions busting.

The FCA's portion amounted to £137.6m ($220m) for multiple breaches of its principles of business.

It says these were "fundamental obligations firms have under the regulatory system".

Other penalties were levied by the US Comptroller of the Currency ($300m) for "unsafe and unsound practices", the US Securities & Exchange Commission (SEC) for "misstating financial results and lacking effective internal controls" and the US Federal Reserve for "oversight, management and controls deficiencies".

The SEC demanded an admission of wrongdoing from JP, a highly unusual step for a bank facing legal action on multiple fronts. Despite the bank claiming that the Comptroller of the Currency was aware of what it was up to with the trades, a US senatorial committee found otherwise, leading former presidential candidate John McCain to accuse senior JP executives of "deception".

They avoided direct criticism from the then regulators, but the FCA called out senior management of JP saying: "The firm's senior management gave insufficient weight to inconsistencies raised in the information in its possession, especially in light of the context provided by the scale of the losses in the SCP (synthetic credit portfolio)."

It specifically referenced the "tea cup" comment in a sharply critical final notice.

Andre Spicer, the professor of organisational behaviour at Cass Business School, said:"JP Morgan's mammoth fine hammers home the cost of bad behaviour.

"It reminds banks that they desperately need to change their ways or risk taking a huge hit, not only to their bottom line, but also their reputation.

"With its recent profits, the bank can afford the fine. But the damage to its reputation could be more costly in the long term."

That was echoed by James Carlton, a partner at the law firm Fox Williams, who said that the penalties would "act as a huge shock wave to the industry as a whole".

"Law-enforcement agencies in the US and now in the UK could not be sending out a clearer message if they tried. This case clearly sets out a new benchmark in terms of financial penalties for the industry going forward."

Paying the price: UK regulators' fines

£160m UBS, Libor

£137.6m JP Morgan, London Whale

£87.5m RBS, Libor

£59.5m Barclays, Libor

£33m JP Morgan, Client money

Suggested Topics
Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'