Mr Dimon spoke as U.S. regulator the Securities and Exchange Commission prepared to look into how changes in the way JP Morgan calculates risk might have obscured the potential for these trades to do such colossal damage.
Bruno Michel Iksil, the Frenchman nicknamed 'Voldemort' and 'the London Whale'.
They can be used by bond investors – as a hedge against potential defaults – or traded separately when they are called naked CDSs.
Credit default swaps (CDSs) are a form of insurance on bonds issued by companies and countries that investors can buy and sell. If it looks like an issuer may have trouble paying – such as Greece, for example – the CDS price rises because the bond is more risky and it will cost more to insure.
Also, the JPMorgan Chase loss has reinforced the Federal Deposit Insurance Corporation’s position that risky activities should be separated from traditional commercial banking activities of taking deposits and making loans. It’s a good bet that regulators will start probing comparable trading strategies at other large banks despite the fact that most of them passed stress tests last year.
The JPMorgan Chase losses on its trading activities have renewed calls for stricter regulatory oversight of all the big banks. The advocates of tougher regulation have been emboldened to tighten regulations. For example, the banking industry’s efforts to dial back the Volker rule — which restricts big banks’ ability to trade for their own account — has been severely undermined.
Last week, three months after Mr Weinstein’s tip, the IG.9 has become the unlikely talk of Wall Street after JPMorgan revealed a shock $2bn loss believed to stem from its outsized trading of the derivatives index.
It was the kind of ardent mea culpa that's rarely heard on Wall Street. Jamie Dimon, the revered chief executive of JPMorgan Chase, told analysts late Thursday that the company had screwed up. A unit of the bank that's supposed to manage risk had made a big bet on its loan portfolio, he said, and the bet had backfired.
JPMorgan Chase is licking its wounds after announcing that it lost at least $2 billion in a hedging strategy that went terribly wrong. The announcement late Thursday sent the bank's shares tumbling more than 9 percent on Friday