JPMorgan shares rise as traders responsible for loss to see "clawbacks" in compensationReported by Proactive Investors on Wednesday, 13 June 2012 (on June 13, 2012)
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JPMorgan Chase (NYSE:JPM ) saw its shares rise Wednesday after CEO Jamie Dimon told Congress that it is "likely" there will be clawbacks of compensation paid to chief invesment office traders involved in the unit's losses.
The bank's shares were lately up nearly 2.3 per cent at $34.53 as of 10:55am ET as the hearing got underway. The testimony before the Senate Banking Committee began at 10am.
Last month, JPMorgan announced that a hedging strategy gone wrong produced at least $2-billion in unexpected trading losses. According to reports by CNNMoney, the losses could be as much as $8 billion.
In the testimony cited from a live blog on MarketWatch, Dimon told lawmakers that he personally takes responsibility for failures in the bank’s chief investment office. The division's credit derivatives portfolio should have received more scrutiny from senior management, he said.
In prepared testimony released last night, Dimon planned to say that JPMorgan has named a new head for the investment operation in London that was responsible for the trading losses, as well as established a risk committee.
The sharp loss has sparked debate that the biggest banks still pose a grave risk to the financial system, less than four years after the financial crisis started in 2008.
Since the downturn, Dimon has voiced his strong opinions against stricter financial regulation, which he claims could be slowing the economic recovery.
In the testimony Wednesday, Democrats are likely to push for tighter regulations as part of the Volcker rule that looks to limit banks' speculative trades made for their own profit.
Thanks to lobbying, the banks won an exemption in the rule, which would let them make such trades to hedge not only the risks of individual investments but also the risks of a broader investment portfolio.
Meanwhile, Republicans are expected to make the case for higher capital buffers at big banks.
Dimon has said that the Volcker rule would not have prevented the trading loss, as the trading in credit derivatives was not designed to make a profit for the bank, but rather to hedge against financial risk.
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