THE UNITED STATES’ biggest bank has blamed “errors, sloppiness and bad judgement” after revealing that it had lost over $2 billion (€1.55 billion) in trading on complex financial investments.
JP Morgan Chase’s losses were revealed in a regulatory filing made yesterday, and discussed by the bank’s chief executive Jamie Dimon in a last-minute conference call with investors last night.
BBC News reports that the major loss could mean the bank, which became the biggest in the US after the financial crisis, is set to lose $800 million, or possibly as much as $1 billion, in the second quarter.
Dimon told investors that the management strategies taken at the bank’s chief investment office were “riskier” than previously believed, resulting in “sloppiness” and “egregious mistakes”.
The New York Times said the losses had been accrued within a matter of weeks, and that rumours of heavy losses had started circulating among traders a month ago, dealing with a trader in London – nicknamed ‘Voldemort’, after the Dark Lord in the Harry Potter books – who had begin making larger and more aggressive bets.
Though the losses will not pose any major threat to the bank’s viability – it made $19 billion in profit last year – they will give further fuel to calls for banks to be more heavily regulated in market activities like hedging.
One act passed by Congress in 2010, the ‘Dodd-Frank’ Act reforming regulatory practice on Wall Street, is currently being enacted to feature the so-called ‘Volcker Rule’ which bars banks from using customers’ money to making speculative investments which do not benefit those customers.
Dimon – who has openly opposed giving legal effect to the Volcker Rule – insisted last night that such a rule would not have prevented the newly-reported losses, however.