The US Senate report into the fiasco of a trader in JPMorgan’s office of the chief investment officer (CIO) who racked up such large positions he was nicknamed the “London Whale” makes uncomfortable reading for investment banking executives and regulators across the board. The vast positions run by Bruno Iksil were supposedly part of a bank-wide hedging process for which the CIO was in theory responsible. But the alarming implications of the Senate report are that no-one in the bank really seemed sure what Mr Iksil was hedging, or how.
If the investments were not part of a coherent treasury or risk-management process, then they should have been classed as proprietary trading and fallen foul of the Volcker Rule ban. This episode raises serious doubts over whether Volcker will reduce systemic risk.