The investigation follows evidence that the bank has failed to keep track of almost £8.5 billion of customer money.

Accountants from KPMG have been called in to examine the bank’s activities after JP Morgan managers in London discovered that client and bank money had apparently been put into a single pool.

Although both the bank and the City watchdog have refused to comment, City insiders have reportedly said the scale of the case is “unprecedented.”

If the FSA finds that bank managers were slack in setting up systems to monitor customers’ funds, they could face being barred from holding positions in the City. If enforcement action is deemed necessary, JP Morgan could also be slapped with a record fine.

Preliminary findings from KPMG will be delivered to the FSA by the end of August, and a final report will be submitted at the end of September. Unless the bank is found guilty of failing to protect clients’ money and the regulator decides enforcement action needs to be taken, the report will not be made public.