For the last few years we have heard time and again, bank chief executives and others saying: " We are trying to clean things up, we get it, we know we have to change our culture."
And here low and behold, this was going on in London in a big international bank about 18 months ago - and then management tried to cover it up.
They did not want to acknowledge to the authorities what was really going on.
What was striking to me today was that authorities are clearly concerned that the message has not got right down to the trading floor, where people are actually doing these deals day in day out.
There have been lots of changes to the rules, but if there are loopholes still there which clearly there appear to be, that makes it much harder for the people at the top of banks who do try to persuade us all the time that they get it and want things to change to be taken seriously.
It makes it harder for the rest of us to trust what banks are getting up to.
We've said it before, I'll say it again it is difficult for our economy and the economy right around the world to get motoring again if that relationship between banks and the public is still fractured in some way.
And that is what this story is a reminder of to me.
Investment bank JP Morgan has "accepted responsibility" for serious failings over the the 'London Whale' trading scandal that triggered losses of $6.2 billion (£3.9 billion.)
– JP Morgan chairman and chief executive Jamie Dimon
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.
Investment bank JP Morgan's combined £572 million fine today by UK and US regulators over the 'London Whale' trading scandal is the second biggest banking fine, behind HSBC's £1.1 billion money laundering penalty in 2012.
Here is a breakdown of the biggest fines in banking history:
- 1) Bank: HSBC (2012). Fine: £1.1 billion. Reason: Money laundering.
- 2) Bank: JP Morgan (2013). Fine: £572 million. Reason: 'London Whale' trading scandal.
- 3) Bank: UBS (2009). Fine: £485 million. Reason: Tax evasion.
- 4) Bank: Standard Chartered (2012). Fine: £415 million. Reason: Anti-sanctions.
- 5) Bank: ING (2012). Fine: £385 million. Reason: Anti-sanctions.
- 6) Bank: Goldman Sachs (2010). Fine: £359 million. Reason: Misleading investors.
- 7) Bank: Credit Suisse (2009). Fine: £333 million. Reason: Anti-sanctions.
- 8) Bank: ABN Amro (2010). Fine: £311 million. Reason: Anti-sanctions.
- 9) Bank: Barclays (2010). Fine: £280 million. Reason: Libor manipulation.
- 10) Bank: Lloyds Bank (2009). Fine: £218 million. Reason: Anti-sanctions.
Here are the key points in the "London Whale" trading scandal which led to JP Morgan's £572 million fine by UK and US regulators.
- The "London Whale" trading scandal happened last year when JP Morgan traders bet huge sums on complex financial instruments and covered up losses when trades went wrong and problems escalated.
- Trader Bruno Iksil, one of the highest-paid bankers in London at the time, was responsible for losing the bank £1.2 billion through bets of derivative credit default swaps.
- He has agreed to testify against his colleagues and is reported to have been granted immunity by American prosecutors.
- The bank was criticised for its high-risk trading strategy, weak management, a poor response to the problems and failing to co-operate with regulators.
Here are the key points behind JP Morgan's £572 million fine issued by US and UK regulators.
- JP Morgan was handed a £137 million fine by the the UK's Financial Conduct Authority (FCA), the second biggest ever issued by a UK authority.
- The bank was also given a £435 million penalty by three American regulators, including the US Federal Reserve.
- JP Morgan's total fine for "serious failings" over the London Whale trading scandal is £572 million.
The biggest fine happened in December last year when UBS were given a £160 million penalty by the Financial Services Authority (FSA) over libor failings.
In a statement, the FCA's director of enforcement and financial crime, Tracey McDermott, 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.
– Tracey McDermott, FCA director of enforcement and financial crime
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.
The bank breached four of the FCA’s Principles for Businesses - the fundamental obligations firms have under the banking regulatory system.
The breaches occurred in connection with the $6.2 billion trading losses sustained by CIO in 2012.
The losses were part of the “London Whale” trading scandal and the bank's reportedly high risk "hedging" strategy.
Investment bank JP Morgan has been fined £572 million ($920 million) by UK and US regulators over the "London Whale" trading scandal.