JPMorgan shares slump 6.5pc after chief Jamie Dimon reveals $2bn trading loss

By Richard Blackden, US Business Editor

America’s second-biggest bank said that the losses stemmed from a series of complex trades that were designed to hedge the bank's overall risk.

Some of the losses have been offet by gains of about $1bn from the sale of other financial assets, according to the bank, which said that the division that made the trades will now lose about $800m this quarter.

The trading losses are an acute embarrassment for Mr Dimon who has led Wall Street’s fight against what banks have deemed excessive regulation in the wake of the financial crisis. Mr Dimon said that the set of trades, which includes credit default swaps, was designed to shield the bank from risk in the financial markets. “In hindsight, it was bad strategy, bad execution,” he said.

However, the scale of the losses will prompt renewed debate about the level of regulation that is needed to ensure the safety and soundness of the financial system. The chief investment office (CIO), the part of the bank that put on the trades, had moved from hedging risk to making speculative bets designed to reap profits for the bank, Bloomberg reported last month.