A trader at JPMorgan Chase's London office was linked to the $2bn (£1.2bn) loss in a proprietary trading portfolio, Sky sources have confirmed.
The employee's activities were part of the company's wider trading strategy, the source added.
The largest bank in the US admitted losing the money in a trading portfolio of derivatives designed to protect the company against risks it took with its own funds.
JPMorgan Chase shares lost 9% as markets opened following the news overnight.
Other bank stocks, including Citigroup, Bank of America and Barclays, also suffered losses.
Chief executive Jamie Dimon had previously blamed "errors, sloppiness and bad judgement" for the embarrassing loss.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," he said.
Mr Dimon conceded that the losses were related to a report in the Wall Street Journal in April about London-based trader Bruno Iksil, nicknamed the 'London Whale', and the large trading position he had amassed which hedge funds bet against.
jpmorgan came through the 2008 financial crisis better than many other US banks, never posting a loss and remaining strong enough to take over investment bank Bear Stearns and consumer bank Washington Mutual when they collapsed.
However, the bank acknowledged the latest developments could hit its reputation.
"This puts egg on our face," Mr Dimon admitted.
CEO James Dimon said JP Morgan had 'egg on our face'
Partly because of the $2bn (£1.2bn) trading loss, JPMorgan said it expects a loss of $800m (£496m) this quarter for a segment of its business known as corporate and private equity.
It had planned on a profit for the segment of $200m (£124m).
"We will admit it, we will learn from it, we will fix it, and we will move on," Mr Dimon said in a hastily scheduled conference call with stock analysts.
David Buik from BGC Partners told Sky News the loss would be devastating to Mr Dimon and should have been flagged up by the bank's compliance department.
JPMorgan has been a strong critic of several provisions that would have made this loss less likely, said Michael Greenberger, former enforcement director of the Commodity Futures Trading Commission, which regulates many types of derivatives.
"These instruments are not regularly and efficiently priced, and a company can wake up one day, as AIG did in 2008, and find out they're in a terrific hole. It can just blow up overnight," he said.
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