US bank fined £572m over scandal
US investment bank JP Morgan Chase has been fined 920 million US dollars (£572 million) by regulators for "serious failings" over the London Whale trading scandal.
The high-risk trading scandal last year triggered 6.2 billion US dollars (£3.9 billion) of losses and sent shock waves through financial markets.
JP Morgan was handed a £137 million fine by the the UK's Financial Conduct Authority (FCA) and penalties totalling 700 million US dollars (£435 million) by three American regulators, including the US Federal Reserve.
The FCA said JP Morgan's "extremely serious failings" undermined confidence in UK markets.
Regulators said the bank had admitted wrongdoing for the scandal, which originated from its chief investment office in London.
It saw traders bet huge sums on complex financial instruments and cover up losses when trades went wrong and problems escalated.
Trader Bruno Iksil, who was dubbed the London Whale because of the size of his trades, has agreed to testify against his colleagues and is reported to have been granted immunity by American prosecutors.
The bank was criticised for a high-risk trading strategy, weak management, a poor response to the problems and failing to co-operate with regulators.
The FCA's director of enforcement and financial crime Tracey McDermott said JP Morgan "failed to get a proper grip on the risks its business poses to the market".
She said: "As things began to go wrong, the firm didn't wake up quickly enough to the size and the scale of the problems.
"What is worse, they compounded this by failing to be open and co-operative with us as their regulator."
The bank was also fined by t he US Securities and Exchange Commission and the Office of the Comptroller of the Currency.
The FCA said its fine would have been £197 million if the bank had not agreed to settle at an early stage.
The UK penalty is the second-biggest fine by the City regulator, after Swiss bank UBS was ordered to pay £160 million last December for rate-rigging.
That fine was handed down by the FCA's predecessor, the Financial Services Authority, and related to "extensive and widespread" attempts to rig the Libor interbank lending rate.
UBS was ordered to pay a total of around £940 million when including penalties in the US of 1.2 billion US dollars (£737 million at the time) and in Switzerland of 59 million Swiss francs (£40 million).
Regulators said the JP Morgan trading strategy was so risky and the bets so large that it faced heavy losses even from a small market move.
But despite this, they said JP Morgan assumed the numbers indicating a breach of risk limits were unreliable and simply approved limit increases.
And when losses began to mount as financial markets moved against the bets, traders shifted the goalposts by understating them, marking their positions in a "noticeably favourable way".
In July last year, the bank finally admitted losses of 5.8 billion US dollars (£3.6 billion) in its so-called synthetic credit portfolio (SCP), managed from London.
By the end of last year that had swollen to 6.2 billion US dollars (£3.9 billion).
Two of the bank's former London-based traders, Javier Martin-Artajo and Julien Grout, have been charged by US regulators in relation to the scandal.
JP Morgan chairman and chief executive Jamie Dimon said: "We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them.
"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."
Separately, JP Morgan has been fined 309m US dollars (£192.6 million) b y the US Consumer Financial Protection Bureau (CFPB) for illegal credit card practices.
Between October 2005 and January 2012, JP Morgan Chase customers were charged monthly fees ranging from 7.99 dollars (£5) to 11.99 dollars (£7.50) for "identity theft protection" and "fraud monitoring" services that were never performed, a ccording to the CFPB, prompting refunds for around 2.1 million.
Richard Cordray, CFPB director, said: "At the core of our mission is a duty to identify and root out unfair, deceptive and abusive practices in financial markets that harm consumers.
"This order takes action against such practices."