JPMorgan's Whale deal with regulators leaves much unsettled

Fri Sep 20, 2013 9:34am EDT
 
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By David Henry and Emily Flitter

(Reuters) - The "London Whale" trading scandal, once dismissed as a "tempest in a teapot" by JPMorgan Chase & Co CEO Jamie Dimon, is costing the largest U.S. bank $920 million in penalties and a rare public admission of wrongdoing.

Settlements with four U.S. and British regulators, made public on Thursday, resolve the biggest civil probes of the bank's $6.2 billion of Whale derivatives trading losses last year. Criminal investigations are still under way.

The bank called the settlements, "a major step in the firm's ongoing efforts to put these issues behind it." It was cited for poor risk controls and failure to inform regulators about deficiencies in risk management that it knew about.

But the deals, hard fought in the case of the U.S. Securities and Exchange Commission, which narrowly approved its settlement with a split vote, do not clear up the legal problems some individuals at the bank might face as the SEC continues its investigation. They also leave unresolved other issues that have helped drive the bank's legal costs to $5 billion a year and undermined Dimon's hold on his job, as well as his influence on the banking industry and its regulation.

Reaction to the settlements in Washington appeared mixed, with lawmakers responsible for financial oversight expressing a range views about whether enough had been done to hold JPMorgan accountable for the Whale scandal.

JPMorgan's board recently changed its rules to give more power to directors other than Dimon after some shareholders cited the risk-control problems to argue that Dimon should not be both board chairman and chief executive.

The company continues to face a criminal probe by U.S. prosecutors into the derivatives debacle, despite Dimon's public insistence that no bank executives intentionally misled investors.

But a person familiar with the matter said the SEC is still investigating individuals and they are not considered lower-level people.   Continued...

 
A U.S. and JPMorgan flag fly in front of the headquarters of JPMorgan Chase & Co bank in New York, March 15, 2013. REUTERS/Lucas Jackson