JPMorgan Slapped with $920 Million in 'London Whale' Fines

Updated from 9:46 a.m. ET with market reaction and comment from JPMorgan CEO James Dimon.

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) on Thursday was hit with $920 million in fines by regulators in the U.S. and the UK, springing from the bank's massive hedge-trading losses in 2012.

The bank entered into a consent order with the Federal Reserve and agreed to a $200 million civil penalty, which cited JPMorgan's failure "to appropriately inform its board of directors and the Federal Reserve of deficiencies in risk-management systems identified by management."

JPMorgan previously entered into a Federal Reserve cease-and-desist order in January, agreeing to remedy "unsafe and unsound practices" that led to the firm's "London Whale" hedge trading losses of at least $6.2 billion.

Also on Thursday, the Office of the Comptroller of the Currency -- the prudential regulator for JPMorgan Chase Bank, NA, JPM's main bank subsidiary -- slapped the bank with $300 million in civil penalties, "for unsafe and unsound practices related to derivatives trading activities conducted on behalf of the bank by the Chief Investment Office (CIO)."

The Securities and Exchange Commission fined JPMorgan Chase $200 million, according to the OCC's press release.

The UK Financial Conduct Authority fined JPMorgan Chase Bank, NA roughly $220 million for "serious failings related to its Chief Investment Office (CIO)," saying in a statement that JPMorgan's conduct demonstrated flaws "permeating all levels of the firm: from portfolio level right up to senior management."

Comptroller of the Currency Thomas Curry in a statement said the regulators' efforts represented "extraordinary work and international cooperation to help ensure our financial system operates in a safe and sound manner and in accordance with applicable laws domestically and abroad."

Three days of leaks this week drove loads of media reports predicting the settlement, with totals as high as $900 million, which were slightly lower than the actual total announced. There have been plenty of additional leaks by federal authorities, including a Wall Street Journal report on Tuesday saying the Commodity Futures Trading Commission was conducting a separate investigation of the bank, and that the Department of Justice could still press criminal charges against the bank (not just against a few traders) overt the hedge trading debacle.

Regulators' success in generating four days of consecutive negative headlines this week, showed an enhanced focus on maximizing media pressure against the bank, as the pattern of leaks against JPMorgan intensified.

JPMorgan's shares were down 1% in early trading to $52.79, with the subdued reaction possibly showing relief over the settlement amount, which is far less than the third-quarter litigation expenses CFO Marianne Lake hinted at when speaking at a conference on Sept. 9.

Lake said the bank was expecting net losses in its mortgage origination business during the second half of 2013, and that a "crescendo" of regulatory activity would lead to additions to third-quarter additions to litigation reserves "which will more than offset the $1.5 billion or so of consumer reserve releases."

JPMorgan CEO James Dimon in a recent internal memo on Tuesday had warned employees that there was "more to come" in the "weeks and months" ahead, regarding "legal and regulatory issues facing our company."

Dimon in a statement on Thursday said "We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. We will continue to strive towards being considered the best bank - across all measures - not only by our shareholders and customers, but also by our regulators."

Dimon added that "Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better Company."

JPM Chart JPM data by YCharts

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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