Nov. 4 (Bloomberg) – JPMorgan, the biggest U.S. bank, is facing a
criminal probe in the U.S. into the firm's foreign exchange business.
Bloomberg's Su Keenan reports on "First Up." (Source: Bloomberg)
The firm is cooperating with the criminal investigation by the Department of Justice as well as inquiries by regulators in the U.K. and elsewhere, it said yesterday in a quarterly report. The largest U.S. bank said it might need as much as $5.9 billion to cover losses beyond reserves for legal matters, up $1.3 billion from the end of June, and the most since since mid-2013.
“In recent months, U.S. government officials have emphasized their willingness to bring criminal actions against financial institutions,” the bank wrote of the general legal environment. “Such actions can have significant collateral consequences for a
subject financial institution, including loss of customers and business.”
Chief Executive Officer Jamie Dimon, 58, who led the New York-based firm through $23 billion in settlements last year, is contending with an international probe into whether traders at the biggest banks sought to profit by rigging currency rates. Citigroup Inc. (C) and Zurich-based UBS AG disclosed last week they also face criminal inquiries by the Justice Department into their foreign-exchange dealings. Citigroup cut third-quarter results to include a $600 million legal charge.
The lobby of the JPMorgan Chase & Co. headquarters in New York, on April 10, 2014.
‘No Assurance’
“These investigations are focused on the firm’s spot FX trading activities as well as controls applicable to those activities,” JPMorgan said its report. While the company is in talks to resolve the cases, “there is no assurance that such discussions will result in settlements,” it said.Banks are facing foreign-exchange probes by authorities on three continents, people with knowledge of the situation have said. Richard Usher, JPMorgan’s chief currency dealer in London, left the company amid efforts to settle a U.K. probe into allegations of foreign-exchange rigging, people with knowledge of the moves said last month. He hasn’t been accused of any wrongdoing.
JPMorgan booked $1.01 billion in legal expenses during the third quarter, tied “in large part” to the currency probes, Chief Financial Officer Marianne Lake said on Oct. 14. Cases could cost banks as much as $41 billion combined to settle, analysts at New York-based Citigroup, led by Kinner Lakhani, said last month.
Marianne Lake, CFO of JPMorgan Chase & Co., at a Bloomberg Television interview in... Read More
Holder’s Vow
The bank separately estimated that fourth-quarter sales and trading revenue will drop by about $300 million, or 8 percent, amid a push to simplify the company. Costs in the division will be lowered by about $200 million as the firm sells units including its physical commodities business as part of that effort, it said.U.S. Attorney General Eric Holder announced in May that authorities were pursuing criminal cases against banks, showing that financial institutions aren’t too big to prosecute. The Justice Department later wrested guilty pleas -- once viewed as a death penalty for a bank -- from Credit Suisse Group AG (CSGN)’s main bank subsidiary for helping Americans avoid taxes, and from BNP Paribas SA (BNP) for handling banned transactions involving Sudan, Iran and Cuba.
U.S. firms began disclosing estimates for possible legal losses after the U.S. Securities and Exchange Commission told finance chiefs in 2010 they should provide investor guidance “when there is at least a reasonable possibility” costs will be incurred, even if the risk is too low to require reserves.
JPMorgan, the biggest U.S. bank, slid 0.7 percent to $60.45 in extended trading at 6:11 p.m. in New York.
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