By James Salmon
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JP Morgan is facing an investigation by US and UK regulators over its £1.2bn trading loss which spooked world markets.
The blue-blooded US investment bank has been told by the Financial Services Authority to hand over details of its gambles on complicated investments which backfired spectacularly. Mary Schapiro, chairman of the US securities and exchange commission said: ‘I think it’s safe to say that all the regulators are focused on this.’
The bank has also launched its own internal probe.
The news comes after one of its top dealmakers Ian Hannam was fined £450,000 for market abuse last month.
JP Morgan chief executive Jamie Dimon said the firm had been left with ‘egg on its face’. He described the strategy as ‘flawed, complex, poorly reviewed, poorly executed and poorly monitored.’
It is understood the huge losses stem from bets on complicated financial instruments called credit default swaps. A key player in the latest humiliation for JP Morgan is London based trader Bruno Michel Iksil, nicknamed ‘Voldemort’ and the ‘London Whale’ after being exposed as the man behind a series of huge bets which moved markets.
He is still working at the bank and there is no suggestion of wrong doing. It also emerged that Ina Drew â€" Iksil’s boss and head of the chief investment office behind the losses â€" pocketed £8.7m last year.
The mistake, which the firm admitted could increase by another $1bn (£621m) shocked investors, with bank shares sliding on both sides of the Atlantic.
Barclays fell 6p, to finish on 202.8p, while shares in JP Morgan dropped 9 per cent. HSBC slid 2.3p to 554.2p, RBS lost 0.09p to end the day at 22.96p, and Lloyds fell 0.12p to 31.08p.
Chris Leslie, shadow Treasury minister, said : ‘There are still huge risks in the banking system that are not properly understood. Banks urgently need to get a grip on them.’
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JP Morgan sharks of the financial world have been for over a hundred years, I do wonder if he is related to the famous pirate.
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Plastic money for plastic people with plastic lives...... If they made a loss then the loss was just a plastic one. The factories still produce the goods they did last week and the staff still go to work in the real world. Kill the stock market off and stop this stupidity.
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What ? Your traders trading without stop losses in place? And you left open your postions over the last weekend? Deserve what you get, some one else got your 1.2 billion, its in there somewhere!
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As a retired COMMERCIAL banker I continue to despair of the lack of official regulation and control of these so called INVESTMENT bankers / traders. It was very evident even before I retired that these "hedging transactions" were no more than heavily disguised wagers on this or that market or asset movement. Since the collapse of the subprime merry go round I sense that these artificial money making opportunities are becoming ever more complex and riskier. At the end of the day the investment banker walks away with his bonus, someone else (usually a commercial banker) clears up the mess and shareholders (yours and my pensions) bears the cost. I have read elsewhere that the SEC and the FSA should have been aware of the risk attached to these deals but I suspect that they (like JPM's Risk Management Dept) simply couldn't understand them.
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You f-ck up a business and you are stilled payed 8.7 million pounds.! You could not make it up.!!!!!!
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