The $2 billion-and-counting trading loss at JPMorgan Chase & Co rattled investors on Monday, raising fears of more trouble to come from a possible wave of ratings downgrades of major global banks. Market participants said the mismanaged derivatives trade at JPMorgan raised concern about other banks? derivatives strategies. ?It raises the question that if JPMorgan is the best of the breed, what are the other guys doing?,? said MacNeil Curry, chief rates and currency technical strategist at Bank of America Merrill Lynch. That?s a question Moody?s Investors Service is likely to ask as it reviews the business models and risk management systems of 15 global banks and securities firms.
Loss to be probed, says Obama
US President Barack Obama has said the trading loss by ?one of the best managed banks? JPMorgan will be investigated and it demonstrates the need for reform at Wall Street. ?Had a bank not as strong as JPMorgan made the losses through betting, the government would have had to step in,? said Obama. Despite JPMorgan being run by one of the ?smartest? bankers, it still lost money, making a strong case for Wall Street reform, he added.
Fed examining other risks by JPM
The Federal Reserve is examining whether JPMorgan is taking risks elsewhere in the bank similar to the botched trading strategy that could cost the bank more than $2 billion, a Fed spokeswoman said. The central bank is also reviewing whether the trading losses have any broader implications for how JPMorgan manages its risk. Regulators and bank officials are determining the exact details behind trades JPMorgan says were intended as hedges against credit risk but that could wind up costing the bank more than $2 billion.
New CIO rejigs investment office
JPMorgan?s Matt Zames, newly-appointed to lead the bank?s chief investment office, shook up leadership and announced a ?renewed focus? on hedging risks. Zames named new finance and risk chiefs and wrote in a staff memo on that top London-based trading executive Achilles Macris would hand off duties.