25 September 2013, 20:51

JP Morgan to remain afloat after paying federal laws violations settlement - expert

JP Morgan Chase банк

US banking and financial services holding company JP Morgan Chase is negotiating with US regulators over a $4 billion financial settlement. US Department of Justice had preliminarily concluded that the firm violated federal securities laws in its offerings of mortgage-backed securities leading up to the financial crisis of 2007–08. VoR disscussed the issue with Chris Roebuck – a British economist and a Visiting Professor at Cass Business School in London.

What is your forecast for JP Morgan amid the ongoing investigation into alleged securities law violations?

My view is that there are two key issues here. There is the getting of the mortgages and granting of the mortgages to people that they did within the system that existed within the US and many other countries at the time. And then, there is what happened to those mortgages after they were packed up with other mortgages into securities. The two issues are slightly different. Obviously, what is happening is the use of those mortgages with other mortgages into complex products that caused the financial crisis is the subject of one investigation and how people were sold those mortgages is another one. But the totality of the fine, because JP Morgan is financially sound, is going to be an embarrassment more than a critical disaster.

How does this bank manage to remain afloat do you think, in this situation?

I think, if you look at what happened within the financial crisis around the world, JP Morgan came out of the financial crisis significantly stronger than a lot of other major banks who had severe problems, for example RBS in the UK and UBS in Switzerland. And I think the issue there is that there were expected to be things that came to the surface, and they did. But JP Morgan is so sound financially that, as I say, this is an embarrassment but something that will not bring the bank down. There are other banks that are not in such a secure position across the world, where, if they had a fine of this size, it would bring the bank down. But JP Morgan is okay.

And the fines are really huge, though. Do you think JP Morgan will find resources to pay all of them?

Yes, I think so, because, obviously, the US regulators and other regulators around the world, and this is not just US regulators and British regulators, it is also regulators in Hong Kong, it is regulators in Singapore that are looking at a number of issues – they want to make a fine that will make it clear that they are not happy and this should not happen. But the last thing the regulators want to do is to bring down another international bank, because if they do that, then they will restart the financial crisis by setting the fine too high. So, it is clear that that would be a bad thing from the perspective of not only the Western economy, but also Russia and China as well for another global bank to go down.

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