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JP Morgan 'agrees to pay $13bn fine' with US govt

Banking giant JPMorgan has tentatively agreed to pay $13 billion (£8 billion) to settle allegations surrounding the quality of mortgage-backed securities it sold in the run-up to the 2008 financial crisis.

JP Morgan 'agrees to pay huge fine' Credit: Charles Guerin/ABACAUSA.COM

If the agreement is finalised it would be the US government's highest-profile enforcement action related to the financial meltdown that plunged the economy into the deepest recession since the Great Depression of the 1930s.

The source said Attorney General Eric Holder, Associate Attorney General Tony West, JP Morgan chief executive Jamie Dimon and the bank's general counsel, Stephen Cutler, negotiated the tentative settlement in a Friday night phone call.

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JP Morgan: 'We have accepted responsibility'

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.)

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.

– JP Morgan chairman and chief executive Jamie Dimon

Breakdown of the biggest banking fines

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:

Source: Reuters

  • 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.

What is the 'London Whale' trading scandal?

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.

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Breakdown of JP Morgan's £572m fine

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.

FCA: JP Morgan's failings 'extremely serious'

The Financial Conduct Authority (FCA) says JP Morgan's failings over the "London Whale" trading scandal are "extremely serious" and undermine "confidence in UK financial markets".

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.

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.

– Tracey McDermott, FCA director of enforcement and financial crime

FCA fine JP Morgan for 'breach of principles'

Investment bank JP Morgan has been fined £572 million ($920 million) by UK and US regulators. Credit: REUTERS/Dylan Martinez

The Financial Conduct Authority (FCA) has fined JP Morgan £572 million ($920 million US dollars) for serious failings related to its Chief Investment Office (CIO).

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.

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