Federal Reserve terminates London Whale enforcement action

Register now

WASHINGTON — The Federal Reserve Thursday filed a motion in court terminating its January 2013 enforcement action against JPMorgan Chase tied to its "London Whale" trading scandal, which spurred more than $6 billion in losses in 2012.

The debacle, in which a single trader at the bank’s London office initiated trades in credit default swaps that led to the massive losses, soon sparked a series investigations by authorities in the U.S. and Europe and a public relations crisis for the bank.

Although Jamie Dimon, the bank's CEO, initially dismissed the problem as a "tempest in a teapot," JPMorgan ultimately paid more than $1 billion in fines over the fiasco.

The Fed's enforcement action required the bank to develop and submit detailed plans and processes to prevent a similar trading loss from occurring, including internal processes “to ensure the consistent identification and escalation of material financial issues relating to trading activities to senior management and the board of directors.”

The central bank also required JPMorgan to develop “enhanced market risk and price risk model governance firm-wide” and “measures to ensure that the fundamental elements of JPMC’s risk management program are effective and implemented consistently across the firm with respect to trading activities.”

For reprint and licensing requests for this article, click here.
Enforcement actions Credit derivatives Policymaking TBTF Federal Reserve JPMorgan Chase