* BoE's Bailey sees no UK conduct issue at JPMorgan yet
* Losses a "salutary lesson" in use of risk measuring models
* UK banks' Greek exit contingency plans more detailed
By Huw Jones
LONDON, May 24 Trading losses of $2 billion at
JPMorgan were due to poor risk management and indicate
no local rule breaches for the moment, Britain's top banking
supervisor said on Thursday.
"It's bad risk management," Andrew Bailey, Bank of England's
executive director for banking supervision, told reporters.
"I don't for the moment see a conduct issue," he said,
adding that the United States was the lead regulator for the
American banking giant.
"The bottom line is this is predominantly a U.S. issue,"
The loss suffered by JPMorgan is a "salutary lesson" in the
use of risk models and the danger of over-reliance on single
models and swapping from one model to another without realising
the implications of what was being done.
"The important message is that none of us can have blind
faith in single models," Bailey said in the UK regulator's first
comments on the JPMorgan losses.
JPMorgan conducted its trades in London where it is a
branch, meaning that U.S. regulators are mainly responsible for
day-to-day supervision of operations.
Mary Schapiro, chairman of the U.S. Securities and Exchange
Commission said this week that financial firms must disclose
changes to models they use to gauge their risk-taking.
When JPMorgan Chief Executive Jamie Dimon announced on May
10 that the company had lost at least $2 billion through
"egregious mistakes" in trading, he also said for the first time
that the bank had changed its model for measuring Value at Risk
(VaR) in the office where the derivatives portfolio was managed.
Bailey also said the contingency plans at Britain's main
banks in case of a Greek exit from the euro zone are "becoming
more detailed" to address a range of possible outcomes.
"It's detail without certainty. What none of us can say is
what the consequences of Greece leaving the euro would be,"
He said he was not predicting an exit but the contingency
plans were looking at issues such as how redenomination would
The plans were more detailed as they were looking at a range
of possible ways a Greek exit could happen as there is no
knowing how it would happen, Bailey said.
He was speaking on the sidelines of a conference in which he
questioned the future of free banking in Britain.