JPMorgan Chase, the biggest US bank, has revealed a surprise trading loss of £1.2bn on investments made by its traders.
JPMorgan shares fell 6 per cent, with other bank stocks following.
Goldman Sachs, Citigroup and Bank of America also suffered heavy losses in electronic trading after the market close.
The strategy taken at its chief investment office had been "riskier, more volatile and less effective" than previously believed, chief executive Jamie Dimon said.
"There were many errors, sloppiness and bad judgement. These were egregious mistakes. They were self-inflicted and this is not how we want to run a business," he added.
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