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Big Losses at JP Morgan – a Strange Feeling of Deja Vu

The news last week that JP Morgan had made trading losses of $2 billion in just six weeks has been greeted by the usual exclamations of surprise – how could this possibly occur in such a well regarded institution?  Clearly this particular incident cannot be attributed to a single ‘Rogue Trader’ but already much of the media reporting has focused on the colourful characters involved in the saga such as ‘The London Whale’!

Whilst this type of reporting suggests that each incident is a totally unique event, the likelihood is that when more is known there will be found to be many similarities to other recent banking disasters such as Barings, Allied Irish and SocGen.  One of the key themes in all of these crises is the way in which warning signs are ignored or misunderstood; and already JP Morgan’s CEO has admitted that he was “dead wrong” in April to dismiss concerns over the bank’s trading practices.  Despite the huge publicity surrounding each of these events, banks seem unable (or unwilling) to learn this simple lesson.