The FSA is unable to give an update on investigations into trading losses at JP Morgan despite the release of a scathing report by the US Senate.
According to a spokesman for the City watchdog, the FSA’s position on JP Morgan following the so-called ‘London Whale’ incident in 2011 has not changed since January when it said it was liaising with regulators around the world.
Although the trading took place in the London office, the US Senate this month published a 300-page report following an investigation led by its permanent subcommittee.
The Senate claimed the bank had mischaracterised high-risk trading, after credit derivative transactions caused it to lose $6.2bn (£4bn).
The report found that JP Morgan Chase’s chief investment office in London constructed a $157bn (£103bn) portfolio of synthetic credit derivatives, engaged in “high risk, complex, short-term trading strategies” and “disclosed the extent and high-risk nature of the portfolio to its regulators only after it attracted media attention”.
Despite the trades emanating from London, when asked if it would publish a similar report, an FSA spokesman reiterated its response in January, which read: “The FSA’s regulatory response to this matter is ongoing and it is liaising with other regulators.
According to the spokesman, the City watchdog has a memorandum of understanding with US agencies such as Financial Industry Regulatory Authority and the Securities and Exchange Commission, but not with the Senate, although he said there was “nothing to stop the Senate accessing the public report”.
The FSA was also accused by MPs on the Treasury Select Committee of lagging behind the US in relation to the report into Libor manipulation, with its investigations into the issue appearing to come some two years after US regulators who had begun making enquiries in 2008 and 2009.
Background
In January four orders were issued against JP Morgan by the US Federal Reserve and the US Treasury’s office of the comptroller of the currency which criticised its internal checks and controls systems. The orders required the bank to develop a plan for improving its risk-management and anti-money laundering oversight.
Adviser view
Joe Hill, director and IFA for Northamptonshire-based Independent Life & Pensions Group, said: “The FSA is always keen on publishing details about firms it regulates that haven’t done things in an acceptable way, so its own actions shouldn’t be any different.”
