NEW YORK - JPMorgan Chase's shares were pummeled Friday and politicians blasted its CEO Jamie Dimon after the bank reported a shock US$2 billion (S$2.5 billion) derivatives loss that even the pugnacious chief executive called "egregious."
The huge New York-based bank sent shivers through the markets with the loss, after having convinced many that a well-managed bank could manage the risks of complex derivatives that lay behind the 2008 financial crisis.
Politicians called for tightening bank regulation and tough controls on hedging activities, and a Republican senator requested a hearing into the case.
"Are we confident that taxpayers are fully protected from losses at major financial institutions?" asked Senator Bob Corker in a letter to the Senate Banking Committee head.
Dimon revealed the losses late Thursday in an unscheduled call to analysts, saying they were incurred in the last six weeks by the New York bank's risk management unit, the Chief Investment Office.
They involved trading in credit default swaps usually meant to offset other risks in the bank's investments, but Dimon said the strategy "morphed" into trading that was overly complex, poorly executed and badly overseen.
"These were egregious mistakes," Dimon said. "They were self-inflicted and... this is not how we want to run a business."
Although he said the bank was still very profitable, Dimon also acknowledged the positions could possibly lead to another US$1 billion in trading losses by the end of this quarter.
"Hopefully by the end of the year... this won't be a significant item for us," he said.
Investors made their displeasure brazenly apparent, savaging the bank's shares from the start of Friday's trading.
The firm's stock closed down 9.3 per cent at US$36.96, wiping around US$14 billion off the market value of the country's largest bank.
There was little new information about what happened at the bank. Attention 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.
A source close to the matter told AFP that the loss was "related, but not exclusively" attributable to Iksil's activities, which had been reported out of London in April by The Wall Street Journal.