The world financial market where already under pressure from the Euro crisis, untill yesterday late night when the news broke out JPMorgan has trading loss of at least $2 bln, reputation hit . The CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.
Below quotes from Mr Jamie Dimon
- “…Errors, sloppiness, and bad judgement.”
- “Bad strategy, badly executed and poorly monitored”
- “It could get worse. This could go on for a little bit.”
- “Badly executed, badly monitored. I’m not going to repeat it 800 times”
- “I know it was done with the intention to hedge tail risk… it was unbelievably ineffective”
Below is the list of some famous cases of rogue trades :
- Jerome Kerviel: He had unauthorized trades in 2007-2008 resulted in 4.9 Billion Loss for France Second Largest Bank Societe Generale , Kerviel was convicted in October 2010 on charges of forgery, breach of trust and unauthorized computer use for hiding bets worth nearly 50bn Euros the court ordered him to pay back the money he lost and he was banned from the financial institution for life. more about him Rogue Trader Jerome Kerviel is Back
- Nick Leeson: in 1995, nick leeson was a trader in Singapore who lost 1.8 Bn USD bringing down the venerable Britch Bank Baring’s Bank PLC . he was sentenced to six and half years in prison
- Joseph Jett : in 1994, Kidder Peabody had to adjust it first quarter earning to reflect 210 million in false profit from the bond trader Joseph Jett , he gave up his bonus which was 8.1 Million USD, was fined 200K USD and barred from any future association. GE sold Kidder Peabody to Paine Webber the following year
- Yasuo Hamanaka (aka Mr. Copper) in 1998, Sumitomo Corp revealed 2.6bn USD loss which it blamed on Hamanaka , formerly the company’s head chif copper trader, he was sent to 8 years in prison.
- John Rusnak: in 2002, Allied Irish Bank discovered that Rusnak at Allfirst Financial institution had 691 mn USD loss for more than 5 years he was sentenced to 7.5 years and the bank was bought by M&T Bank Corp
- Kweku Adoboli : in 2011, this guys cost UBS AG Switzerland 2.3bn in losses from unauthorized trading in S&P 500, DAX and Eurostoxx future indicies.More about him in my previous posts TO BE A ROGUE TRADER . In-fact I wrote more about him The Rogue Trader or The Rogue Banks
- Bruno Iksil – The latest in the episode to join the bandwagon.
Lot of questions needs to be addressed here :
(i) Is “too big” the same as “too big to fail?”
(ii) Do capital requirements force banks to “set capital aside for a rainy day” and not use it to help the economy grow?
(iii) Are banks different from non-banks in that high leverage is essential to banks’ ability to function?
(iv) Would terrible things happen if capital requirements were to increase dramatically?