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JPMorgan Chase will pay $920 million to settle 'London Whale' probes

September 19, 2013|By Andrew Tangel
  • JPMorgan Chase & Co. has agreed to pay $920 million to settle regulatory probes into the "London Whale" trading case.
JPMorgan Chase & Co. has agreed to pay $920 million to settle regulatory… (Spencer Platt / Getty Images )

NEW YORK -- JPMorgan Chase & Co. has agreed to pay $920 million to settle regulatory probes into the firm's "London Whale" trading debacle that rekindled fears of the financial crisis.

JPMorgan, the nation's largest bank, also admitted wrongdoing as part of its broad settlement with four agencies. Regulatory settlements have typically contained no admissions and no denials of wrongdoing.

The probes accused JPMorgan of unsafe banking practices, misstating financial results and lacking sufficient controls to prevent losses that wound up costing the bank more than $6 billion.

The losses stemmed from wrong-way bets involving complex derivatives made by JPMorgan's London office. A trader dubbed the "London Whale" amassed a huge position that become too difficult for the bank to unwind.

“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” George S. Canellos, co-director of enforcement for the U.S. Securities and Exchange Commission, said in a statement. “While grappling with how to fix its internal control breakdowns, JPMorgan’s senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company’s problems and determine whether accurate and reliable information was being disclosed to investors and regulators.”

Thomas Curry, the Comptroller of the Currency, said the penalties and JPMorgan's losses should "serve as important reminders to all bankers of the importance of prudent controls, strong governance and effective risk management."

The U.S. Office of the Comptroller of the Currency assessed the largest penalties among the regulators: $300 million. Under the broad settlement, the Federal Reserve and the SEC will each get $200 million, while the British Financial Conduct Authority will get $220 million.  

The penalties mark the latest chapter in the "Whale" saga that has bedeviled JPMorgan for more than a year.

The episode stunned Wall Street when it came to light last year. JPMorgan had a reputation for strong management, and the bank survived the financial crisis virtually unscathed. In addition to congressional and regulatory probes, the fiasco sparked a criminal investigation; federal prosecutors have charged two of the bank's former employees.

In a statement, JPMorgan said the bank has cooperated extensively with the investigations.

"We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them," Jamie Dimon, JPMorgan's chairman and chief executive, said in a statement. "We will continue to strive towards being considered the best bank -- across all measures --  not only by our shareholders and customers, but also by our regulators. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company."

 JPMorgan's stock fell in early trading. The bank's shares were off 53 cents, or 1%, to $52.88.

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