JP Morgan is the latest bank to settle Enron-related lawsuits

The US bank said it had agreed "in principle" to the deal but had not accepted any wrongdoing in doing so.

JP Morgan and other leading Wall Street banks were accused of helping to assist fraud at Enron, which collapsed with huge undisclosed debts in 2001.

The deal is set to be the largest civil settlement relating to Enron's failure.

'Risk of uncertainty'

Total payouts from Enron-related lawsuits have risen to $4.7bn with Citigroup, the world's largest financial services group, recently agreeing to pay $2bn to Enron shareholders and bondholders.

Investors brought class action lawsuits against JP Morgan Chase, Citigroup and ten other finance firms in the wake of Enron's collapse, accusing them of helping the company to hide losses and commit fraud.

We are working hard to put the uncertainty of litigation risk behind us William Harrison, JP Morgan Chase

JP Morgan said it viewed the proposed settlement as the best way of eliminating the uncertainty and financial cost surrounding the outstanding litigation.

The bank will take a $2bn charge on its earnings in the current quarter to cover the cost of the settlement as well as other legal actions and regulatory investigations.

"We are working hard to put the uncertainty of litigation risk behind us," said William Harrison, the firm's chairman and chief executive.

The settlement must be approved by the company's board and by the board of regents of the University of California, lead plaintiff in the suit.

Largest settlement

The Securities and Exchange Commission fined JP Morgan Chase $135m in 2003 after the watchdog concluded that it had helped mislead Enron investors by helping the company to inflate its earnings.

In paying the fine, JP Morgan Chase did not admit any liability.

Financial claims against Enron's former financial advisers could top the $6.1bn paid out following the collapse of telecoms firm Worldcom in 2000.

"I don't think there is any question the final amount will be in excess of the $6.1bn (for Worldcom) and the largest securities settlement ever," William Lerach, a lawyer advising the University of California, told Reuters.