JP Morgan Slammed In 'London Whale' Report
The ex-JP Morgan Chase executive in charge of the British-based unit that harboured the disastrous "London Whale" trades said she was deceived by other staff of her bank.
Ina Drew told a US Senate hearing that she does not bear personal responsibility for the losses, which are believed to have reached $6.2bn (£4bn).
Ms Drew, the former JP Morgan chief investment officer, said in testimony before the Senate Permanent Subcommittee on Investigations that risk models were severely flawed.
Also testifying on Friday, JP Morgan vice chairman Douglas Braunstein told the committee that CEO Jamie Dimon initially held back from showing reports to federal regulators that would have revealed the bank's massive losses sooner.
Mr Dimon ultimately revealed the losses later last May.
In her testimony Ms Drew added that some members of her London trading team mis-valued positions and hid important risk information from her.
"I believe that my oversight of the synthetic credit portfolio, including during 2012, was reasonable and diligent," Ms Drew said.
"I have since come to learn - based on the company's public statements in July 2012 and Task Force Report in January of this year - that valuations for many of the book's positions were inflated and not calculated or reported in good faith."
She said: "Needless to say, I had no knowledge of these things at the time."
The scandal came to be known as the London Whale trades due to the size of the transactions and the trader responsible for the loss-making positions, Bruno Iksil, subsequently lost his job.
The Senate issued a report on Thursday finding that JP Morgan ignored risks, misled investors, fought with regulators and tried to work around rules as it dealt with mushrooming losses in a derivatives portfolio.
Senior managers at the firm were told for months about the bad derivatives bets that ended up costing the bank more than $6.2bn but did little to rein them in, the report said.
The Senate report came on the same day the US Federal Reserve separately asked JP Morgan to improve its capital planning process as part of an annual "stress tests" of banks.
The barrage of bad news for JP Morgan, long seen as the safest and best-managed US bank, could taint the reputation of the bank.
Chief executive Dimon has been one of the most outspoken critics of Washington's attempts to tightly regulate Wall Street after the 2007-2009 financial crisis.
The report gives ammunition to supporters calling for stricter financial reform regulations.
A JP Morgan spokeswoman said: "While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone."
Although committee sources said the trading losses appeared to be more than $6.2bn, investigators could not determine how much exactly, as those made by the bank's chief investment office were moved to other parts of the bank.
Sources said JP Morgan declined to provide them more information about the values of the positions.
The Senate subcommittee will hear directly from senior JP Morgan executives - but not from Mr Dimon - at a hearing on the derivatives bets.
The Wall Street Journal has published a list of witnesses giving evidence to the Senate committee.