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JPMorgan losses highlight reasoning behind Volcker Rule

Recent losses at JPMorgan Chase have highlighted the reasoning behind proposed

Recent billion-dollar losses at JPMorgan Chase have led some to question the safety of so-called "safe-haven banks," according to Reuters.

JPMorgan had served as a model of risk management and good practices until the company announced roughly $2 billion in losses due to bad derivatives trades, Reuters reported. Following the losses, experts around the world have been scrutinizing the company's structure, focusing primarily on its Chief Investment Office. The group of traders, investors and support staff had been generating money for JP Morgan, which could have lulled management into a false sense of security regarding potentially risky trades, according to the source.

JPMorgan, along with other major banks like HSBC, Royal Bank of Canada and Sumitomo Mitsui, is currently sitting on a massive surplus of funds. Cash from deposits far exceeds the amount of outstanding loans at these banks, a sign of conservative banking practices, according to Reuters. But while most of these banks have invested in relatively safe government bonds, JPMorgan's aggressive market tactics led to trouble for the company.

A proposed U.S. law, the Volcker Rule, would ban banks from betting on trades with money from deposits by separating investment banking and trading divisions within a company. The recent losses at JPMorgan highlight the reasons why some have called for this type of law.