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3 JPMorgan executives to resign – report

Agence France-Presse
The New York Times says their planned resignation was prompted by the firm's US$2-B loss on derivatives trades

WASHINGTON, United States of America – Three JPMorgan Chase senior executives are set to resign this week over the firm’s $2 billion loss on derivatives trades, including the executive who oversaw the trade, US media reported Sunday, May 13.

Chief executive Jamie Dimon is set to accept as early as Monday, May 14, the resignation of Ina Drew, a 55-year-old chief investment officer who has worked at the firm for three decades, The New York Times said, citing company executives.

The Wall Street Journal said two other high-ranking executives were set to leave during the week: Achilles Macris, who heads the London-based desk that placed the trades, and trader Javier Martin-Artajo, a managing director on Macris’s team.

Drew had repeatedly tendered her resignation since the extent of the loss became apparent in late April, but Dimon had refused to accept it until now, according to the reports.

Attention has also focused on the role of a London-based JPMorgan trader, French-born Bruno Michel Iksil, nicknamed “The London Whale” and “Voldemort,” after the villain in the Harry Potter books.

Iksil, who has been tied to the losses, is also likely to leave though it remains uncertain when he will do so, the Journal said, citing people familiar with the matter.

It said Macris, Martin-Artajo and Iksil had been stripped of trading responsibilities.

Shock loss

JPMorgan’s shock loss came over the past six weeks in its risk management unit, the Chief Investment Office, and involved trading in credit default swaps, a so-called “synthetic hedge.” JPMorgan shares closed down 9.3 percent on Friday, wiping $14 billion off the company’s market value.

The losses were a humiliation for Dimon — one of the US financial industry’s biggest figures — and for the bank, after it proudly came through the 2008 crisis in far better shape than many of its rivals.

In recent months, Drew told traders at the Chief Investment Office to execute trades intended to protect the bank from Europe’s financial troubles, executives told the Times.

But Drew waited too late after the market shifted abruptly in April and early May to order traders to scale back the huge bet, and the losses could exceed the estimated $2 billion. Dimon has told analysts that the loss could increase to $3 billion through the end of June due to market volatility.

“This is killing her,” a former JP Morgan executive told the newspaper. “In banking, there are very large knives.”

Drew felt pressure to resign in an effort to appease regulators and shareholders, former executives told the Times.

“The bank has taken bigger losses in investment banking and elsewhere, but because of the timing, she is being piled upon as this huge failure,” a former senior executive said.

The Times report came after Dimon made a contrite but unshaken appearance Sunday, in which he denied that the company’s hedging scheme — designed to lower investment risk, but which instead spectacularly backfired — had placed its future in doubt.

He told NBC television’s “Meet the Press” that the bank made a “stupid” error, adding that “this is a very unfortunate and inopportune time to have had this kind of mistake.” – Agence France-Presse