Regulator hits JP Morgan with £137,610,000 fine over London Whale scandal

Banking giant JP Morgan has been hit with a fine of £137,610,000 from the Financial Conduct Authority (FCA) following the charging of traders who lost the company more than £3.9bn.

The fine is the second-largest to be given by the FCA and much higher than expected, with estimations of around £50m. Compared with the amount the bank lost during the scandal, however, makes the fine symbolic rather than significant.

The bank avoided a fine of £196,586,000, qualifying for a 30 per cent discount under the FCA settlement scheme, having settled at an early stage of the investigation.

The combined fines meted on the bank came in at £920m, with £572m from UK and US regulators.

Bruno Iksil, the most prolific of the three traders, who was given the moniker the London Whale, evaded charge with a plea of agreement and information of trading.

Tracey McDermott, the FCA’s director of enforcement and financial crime said:

When the scale of the problems at JPMorgan became apparent, it sent a shock-wave through the markets. Maintaining the integrity of markets is a key part of our wholesale conduct agenda. We consider JPMorgan’s failings to be extremely serious such as to undermine the trust and confidence in UK financial markets.

This is yet another example of a firm failing to get a proper grip on the risks its business poses to the market. There were basic failings in the operation of fundamental controls over a high risk part of the business. Senior management failed to respond properly to warning signals that there were problems in the CIO. 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.

Firms must learn the lessons from this incident and ensure that they have business practices, values and culture to control the risks in their businesses.

Responding to the fine, Jamie Dimon, chairman and chief executive officer of JP Morgan, 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.

Lee R. Raymond, lead director of the JP Morgan's Board of Directors, said:

The Company has been engaged in a comprehensive program of remediation to address, among other things, the deficiencies reflected in the regulators’ findings. The remedial steps undertaken demonstrate substantial and healthy introspection as well as the seriousness of our commitment to a strong control environment. The Board has overseen these remedial efforts, and has been focused on assuring that management’s interactions with the Board and the Company’s regulators are robust and timely. Our Company has learned from its mistakes, and our Board is confident that our management team is fully committed to ensuring they don’t recur.