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JP Morgan fined £572m over ‘London Whale’ trades

JP Morgan Chase Bank has been fined a total of £572m by UK and US regulators over the “London Whale” $6.2bn trading losses incurred by the bank.

The FCA has fined the firm £137.6m, the US Securities and Exchange Commission has imposed a fine of $200m (£124.4m), the Office of the Comptroller of the Currency fined the firm $300m, and the Federal Reserve levied a fine of $200m.

The FCA says the trading losses, which occurred in 2012, were caused by JP Morgan’s “high risk trading strategy” and an “inadequate response” to information which flagged the risks.

The UK regulator says JP Morgan’s trading strategy for its synthetic credit portfolio caused the size of its positions to grow so large it was at risk of substantial losses from small adverse market movements. 

JP Morgan assumed the amounts which indicated rule breaches on risk limits were unreliable.

When significant losses began to emerge last year, JP Morgan traders sought to hide the scale of the losses by mismarking positions, which went undetected due to flaws in valuation controls.

The FCA says during the first half of last year, JP Morgan failed to co-operate with the UK regulator and hid the extent of the losses as well as “numerous serious and significant issues” relating to to the synthetic credit portfolio.

FCA director of enforcement and financial crime Tracey McDermott says: “When the scale of the problems at JP Morgan became apparent, it sent a shockwave through the markets. We consider JP Morgan’s failings to be extremely serious such as to undermine the trust and confidence in UK financial markets.”

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