JPMorgan Chase & Co. said it faces a U.S. criminal probeinto foreign-exchange dealings and boosted its maximum estimate for“reasonably possible” losses on legal cases to the highest in morethan a year. The shares fell in New York.

The firm is cooperating with the criminal investigation by theDepartment of Justice as well as inquiries by regulators in theU.K. and elsewhere, it said yesterday in a quarterly report. Thelargest U.S. bank said it might need as much as $5.9 billion tocover losses beyond reserves for legal matters, up $1.3 billionfrom the end of June, and the most since mid-2013.

“In recent months, U.S. government officials have emphasizedtheir willingness to bring criminal actions against financialinstitutions,” the bank wrote of the general legal environment.“Such actions can have significant collateral consequences for asubject financial institution, including loss of customers andbusiness.”

Chief Executive Officer Jamie Dimon, 58, who led the NewYork-based firm through $23 billion in settlements last year, iscontending with an international probe into whether traders at thebiggest banks sought to profit by rigging currency rates. CitigroupInc. and Zurich-based UBS AG disclosed last week they also facecriminal inquiries by the Justice Department into theirforeign-exchange dealings. Citigroup cut third-quarter results toinclude a $600 million legal charge.

“These investigations are focused on the firm's spot FX tradingactivities as well as controls applicable to those activities,”JPMorgan said in its report. While the company is in talks toresolve the cases, “there is no assurance that such discussionswill result in settlements,” it said.

JPMorgan slid 1.7 percent to $59.87 at 9:52 a.m., the most inmore than two weeks and the worst performance in the KBW BankIndex. The shares have gained 2.5 percent this year, compared withthe 3.9 percent advance of the 24-company index.

Banks are facing foreign-exchange probes by authorities on threecontinents, people with knowledge of the situation have said.Richard Usher, JPMorgan's chief currency dealer in London, left thecompany amid efforts to settle a U.K. probe into allegations offoreign-exchange rigging, people with knowledge of the moves saidlast month. He hasn't been accused of any wrongdoing.

Holder's View

JPMorgan booked $1.01 billion in legal expenses during the thirdquarter, tied “in large part” to the currency probes, ChiefFinancial Officer Marianne Lake said on Oct. 14. Cases could costbanks as much as $41 billion combined to settle, analysts at NewYork-based Citigroup, led by Kinner Lakhani, said last month.

The bank separately estimated that fourth-quarter sales andtrading revenue will drop by about $300 million, or 8 percent, amida push to simplify the company. Costs in the division will belowered by about $200 million as the firm sells units including itsphysical commodities business as part of that effort, it said.

U.S. Attorney General Eric Holder announced in May thatauthorities were pursuing criminal cases against banks, showingthat financial institutions aren't too big to prosecute. TheJustice Department later wrested guilty pleas — once viewed as adeath penalty for a bank — from Credit Suisse Group AG's main banksubsidiary for helping Americans avoid taxes, and from BNP ParibasSA for handling banned transactions involving Sudan, Iran andCuba.

U.S. firms began disclosing estimates for possible legal lossesafter the U.S. Securities and Exchange Commission told financechiefs in 2010 they should provide investor guidance “when there isat least a reasonable possibility” costs will be incurred, even ifthe risk is too low to require reserves.

JPMorgan said its estimated range, spanning no cost to as muchas $5.9 billion as of Sept. 30, “involves significant judgment,given the varying stages of the proceedings.” It already has setaside money to cover several hundred legal proceedings, and it mayboost those accruals further if additional expenses becomeprobable.

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