JPMorgan to take back employees’ pay in trading losses

JPMorgan Chase & Co. will take back compensation from employees responsible for trading losses that it said have so far totaled $5.8 billion.

Three London-based employees responsible for the bank’s bungled derivatives trades have left the bank and will be subject to maximum claw-backs, executives said Friday morning.

The claw-backs would equal about twice the employees’ annual compensation, though JPMorgan execs would not detail how much would be taken back, nor would they name the employees.

Ina Drew, who oversaw the bank’s Chief Investment Office, where the trading losses occurred, offered to forgo compensation that would have been subject to claw-back, executives said.

“We have already completely overhauled CIO management and enhanced the governance standards within CIO,” said Jamie Dimon, JPMorgan’s chairman and chief executive.

In Washington, Sen. Tim Johnson, the South Dakota Democrat who chairs the Senate Banking Committee, welcomed the claw-backs.

“It shouldn’t take a congressional hearing for JPMorgan to realize that bank employees should not be rewarded for excessively risky behavior, and the bank should hold everyone involved in this blunder accountable,” Johnson said in a statement.

“To help restore confidence in our financial system, Wall Street banks should use this effective tool whenever it is appropriate,” Johnson added.

As JPMorgan reported its second-quarter earnings Friday, the bank said its losses from the risky derivatives bets had reached $5.8 billion so far this year.

That figure includes $4.4 billion from the second quarter. While JPMorgan reported progress in unwinding the trades, executives said losses could widen by as much as $1.7 billion in a worst-case scenario.

JPMorgan, the country’s largest bank by assets, reported an otherwise profitable quarter. The bank said it earned $5 billion, or $1.21 a share, in the second quarter, down from $5.4 billion, or $1.27, in the second quarter last year.

JPMorgan stock gained $1.21, or $3.6%, to $35.25 a share in early trading on Wall Street.

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