BANKING regulators in the United States have hit JPMorgan Chase with two enforcement actions because of failures in risk management that led to a multibillion-dollar trading loss, the first formal sanctions in a case that damaged the bank's reputation and put a spotlight on 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, Britain's largest bank, was poised to report earnings on Wednesday 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 from complex trades and failures by executives to fully inform the company's board about the increasingly risky wagers.
The chief investment office was making large bets on credit derivatives from its London offices. In its order, the comptroller said the unit was "able to increase its positions, risk and, ultimately, losses, without sufficiently effective intervention by the bank's control groups".
The trading loss, now estimated at more than $US6 billion, was first disclosed in May 2012 and cost several senior executives their jobs. Neither of Monday's orders require JPMorgan to pay a fine and it did not admit or deny wrongdoing.