City Watchdog Hits JPMorgan With Huge Fine

By Mark Kleinman, City Editor

The City regulator will slap one of its biggest-ever fines on the Wall Street banking giant JPMorgan on Thursday over the derivatives losses which last year cost it more than $6bn (£3.7bn).

Sky News understands that the Financial Conduct Authority (FCA) will make an announcement at approximately 2pm UK time in which it will say that the so-called "London Whale" affair will cost JPMorgan well over £50m in penalties for failing to ensure the effective supervision of its traders and that its trading positions were accurately reported.

The FCA will also say that it has agreed a string of toughened compliance, reporting and risk management procedures with JP Morgan executives in the UK and that it will monitor the firm's activities more robustly.

Further measures are expected to be announced as part of Thursday's settlement.

People familiar with the agreement said it would be the biggest penalty imposed by the UK regulator for transgressions unrelated to the global Libor rate-rigging probe.

It is possible that only the £160m fine handed out to UBS for Libor-manipulation last December will have been larger, although the exact size of the FCA punishment was unclear.

JP Morgan executives give evidence over the 'Whale' losses to US Senate

The FCA statement will be coordinated with regulators in the US as part of an overall settlement reported by the Wall Street Journal this week at $800m (£496m).

It will not preclude the prospect of additional charges being filed against the bank, the newspaper added.

The "London Whale" involved a London-based trader, Bruno Iksil, who racked up billions of pounds of bets on derivatives products which turned sour, and which were then concealed from the bank's top management by several colleagues who have since been fired.

US prosecutors charged Julien Grout and Javier Martin-Artajo, two former traders at JPMorgan, last month with conspiracy and fraud for allegedly covering up the trading losses. On Monday, a grand jury indicted both men.

Jamie Dimon, JPMorgan's chairman and chief executive, apologised for having initially dismissed the affair as "a tempest in a teapot" and this week announced significant changes to the firm's compliance and risk management functions, including the hiring of thousands of additional employees.

The bank has also clawed back millions of dollars in bonuses from employees over the trading losses.

It is the latest in a series of regulatory blows to hit Mr Dimon, lauded as the most successful banker on Wall Street for having stewarded JPMorgan through the financial crisis.

The FCA and JPMorgan both declined to comment.

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