Hugh Son and Michael Moore New York

JPMORGAN Chase faced a US criminal probe into foreign exchange dealings and boosted its maximum estimate for “reasonably possible” losses on legal cases to the highest in more than a year, it said.

The firm was co-operating in the criminal investigation with the Department of Justice, as well as inquiries by regulators in the UK and elsewhere, it said on Monday in a quarterly report. The largest US bank said it might need as much as $5.9 billion (R65.2bn) to cover losses beyond reserves for legal matters, up $1.3bn from the end of June, and the most since since mid-2013.

“In recent months, US government officials have emphasised their willingness to bring criminal actions against financial institutions,” the bank wrote of the general legal environment. “Such actions can have significant collateral consequences for a subject financial institution, including loss of customers and business.”

Chief executive Jamie Dimon, 58, who led the New York-based firm through $23bn in settlements last year, is contending with an international probe into whether traders at the biggest banks sought to profit by rigging currency rates. Citigroup and Zurich-based UBS disclosed last week that they also faced criminal inquiries by the Justice Department into their foreign exchange dealings. Citigroup cut third-quarter results to include a $600 million legal charge.

“These investigations are focused on the firm’s spot FX trading activities, as well as controls applicable to those activities,” JPMorgan said in its report. While the company was in talks to resolve the cases, “there is no assurance that such discussions will result in settlements”, it said.

Banks are facing foreign exchange probes by authorities on three continents, people with knowledge of the situation have said.

Richard Usher, JPMorgan’s chief currency dealer in London, left the company amid efforts to settle a UK probe into allegations of foreign exchange rigging, people with knowledge of the moves said last month. He hasn’t been accused of any wrongdoing.

JPMorgan booked $1.01bn in legal expenses during the third quarter, tied “in large part” to the currency probes, chief financial officer Marianne Lake said last month.

Cases could cost banks as much as $41bn combined to settle, analysts at New York-based Citigroup, led by Kinner Lakhani, said last month.

The bank separately estimated that fourth-quarter sales and trading revenue would drop by about 8 percent, amid a push to simplify the company. Costs in the division would be lowered by about $200m as the firm sells units including its physical commodities business as part of that effort, it said.

US attorney-general Eric Holder announced in May that authorities were pursuing criminal cases against banks, showing that financial institutions aren’t too big to prosecute. – Bloomberg