Tuesday, 15 January 2013 10:51
UK and US regulators begin investigation into JP Morgan Chase Bank
The Financial Services Authority has announced it has begun a formal enforcement investigation into JP Morgan Chase Bank N.A.
The decision follows trading losses of over $6bn by the firm's chief investment office at its London branch last April.
There are thought to be multiple traders involved, including one trader who was nicknamed the 'London Whale' for the size of his trades and losses.
The FSA said: "In addition to its extensive supervisory agenda, the FSA is continuing to conduct a formal enforcement investigation into the trading losses. Conclusion will be reached in the enforcement investigation in due course and any further appropriate action determined at that time."
The New York Federal Reserve Bank and Office of the Comptroller of the Currency, the US federal banking regulator, have also published supervisory orders.
On the Office of the Comptroller of the Currency website, the organisation stated it had issued a cease and desist order against JP Morgan Chase Bank related to derivatives trading activity.
It said: "The OCC has found that the bank's internal controls failed to identify and prevent certain credit derivatives trading conducted by the CIO that resulted in substantial loss to the bank, which has exceeded $6bn.
"The OCC has conducted several targeted exams which found the following deficiencies related to the credit derivatives trading practices conducted by the CIO: inadequate oversight and governance to protect the bank from material risk, inadequate risk management processes and procedures, inadequate control over trade valuation, inadequate development and implementation of models used by the bank and inadequate internal audit processes."
The two American regulators have also launched a separate cease and desist order relating to failures with JP Morgan's compliance and supervision.
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