REGULATORS in the US have hit JPMorgan Chase with two enforcement actions because of failures in risk management that led to a multibillion-dollar trading loss.
They are the first formal sanctions in a case that damaged the bank's reputation and brought heightened scrutiny to its trading operations.
Regulators also ordered the bank to fix breakdowns in anti-money-laundering controls that threatened to allow tainted money to move through its network.
The cease-and-desist orders from the Office of the Comptroller of the Currency and the Federal Reserve came as JPMorgan was poised to report earnings and potentially issue its own report on the debacle.
The regulators identified deficiencies in several layers of the bank, such as flaws in assessing potential losses resulting from complex trades, and failures by executives to fully inform the company's board about the increasingly risky wagers.
The chief investment office, the once little-known unit at the centre of the trades, was making large bets on credit derivatives from its London offices. The comptroller's office said the unit was "able to increase its positions and risk, and ultimately losses, without sufficiently effective intervention by the bank's control groups".
Separately, Britain's Financial Services Authority announced it was continuing to conduct "a formal enforcement investigation into the trading losses". In the US, the Securities and Exchange Commission and law enforcement agencies are also investigating the trades.
The trading loss, now estimated at more than $US6 billion ($5.6 billion), was first disclosed in May last year. It forced the bank's chief executive, Jamie Dimon to appear before Congress to explain the matter.
Under the terms of the order on Monday, JPMorgan's board has to outline a plan to bolster its risk management along with other critical functions. The bank must also alter how it rewards executives, factoring in poor "risk outcomes and control deficiencies".
Neither of Monday's actions, also known as consent orders, require JPMorgan to pay any fine, and the bank did not admit or deny wrongdoing.