4:08am

Tue September 17, 2013
The Two-Way

JPMorgan To Get Whale Of A Fine For Trading Losses

Originally published on Tue September 17, 2013 7:38 am

Authorities are set to slap banking giant JPMorgan Chase with a massive fine over the bank's huge trading losses in London last year, confirms NPR's Jim Zarroli.

Though details of the deal are still pending, several reports put the amount at more than $700 million. It comes on the heels of the bank's having recently paid $410 million to settle charges that it manipulated energy markets.

The current settlement revolves around an investigation from across the federal government and the globe over trading losses, first announced in May, that have ballooned to more than $6 billion. Regulators including the Securities and Exchange Commission and the Office of the Comptroller of the Currency allege that JPMorgan had inadequate risk controls in place when traders made complex derivative bets that ultimately led to the losses.

Last month, two traders were charged with covering up the losses. The U.K. trader who placed the bad bets, Bruno Iksil, became known as the "London Whale" because of the large size of the trades he made for the company's London office. Iksil is now cooperating with authorities and is likely to avoid prosecution.

The settlement will include fines from the SEC and the Office of the Comptroller of the Currency, but the Financial Conduct Authority, the British financial regulator, will impose its own fine. And even then, JPMorgan most likely won't see closure on this issue. The New York Times has more:

"The Commodity Futures Trading Commission, a regulator that oversees the market in which the losses occurred, has balked at joining the broader settlement announcement, the people briefed on the matter said. The agency has focused on whether JPMorgan, by amassing an outsize trading position so large that it distorted the market for financial contracts known as derivatives, 'manipulated' that market.

"By potentially striking out on its own, the C.F.T.C. has frustrated JPMorgan's efforts to move beyond the trading losses, the people briefed on the matter said. Those efforts to settle were born out of a recent federal crackdown on the bank."

The bank's board is meeting Monday and Tuesday and is expected to approve the fines, though the details could still change. The regulatory actions are expected to be announced later this week.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

RENEE MONTAGNE, HOST:

NPR's business news begins with criminal indictments for traders.

(SOUNDBITE OF MUSIC)

MONTAGNE: A U.S. grand jury has indicted two former employees of JPMorgan Chase for their role in what's known as the London Whale trading disaster. Meanwhile, federal regulators could slap the bank with a civil fine of hundreds of millions of dollars.

NPR's Jim Zarroli has more.

JIM ZARROLI, BYLINE: JPMorgan Chase acknowledged last year that rogue traders in its London office had lost some $6 billion in derivatives trading and managed to conceal the losses from senior rank officials for weeks.

Yesterday, the two traders were indicted for securities fraud and wire fraud. Several published reports also said that the SEC and other federal regulators are about to fault the bank for inadequate internal controls and failing to supervise employees. The reports were later confirmed by a source who asked not to be named.

Officials at the bank are reportedly weighing whether to pay a fine of as much as $700 million and acknowledge wrongdoing. Often in the past, regulators have allowed financial companies to pay fines without admitting they did anything wrong. But the SEC has made clear lately that it wants to avoid such settlements. The SEC declined to comment yesterday, as did the bank.

The settlement is expected to be announced sometime this week. But it probably won't end the matter for the bank. The regulator that oversees the derivatives market, the Commodity Futures Trading Commission, has said it won't join any broader settlement and will press ahead with its own case.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.