Ooh la la! French Bank defrauded of 5 Billion Euro

[refined silver]

I'm not buying the story that a single trader could have hidden a fraud on this scale all by himself if the expected controls were in place for a trading operation this size.
A trading operation should have a trading room, a middle office to monitor the intraday positions & risk and a back office to do the settlement & reconciliation; all strictly segregated.
Each trader should have trading limits and information security controls should ensure that traders can't create bogus user ids to by-pass those limits. There's more heads to roll on this I think.

A fall guy for derivative losses they didn't want to fess up to.

 

[Trembling Hand]

From Bloomberg,
"Societe Generale Says Trader Built Up Positions of EU50 Billion "

I am assuming thats equity exposure not margin but what ever that is a BIG position!! Thats about 900,000 contracts!!!

 

[numbercruncher]

Yes its absolutely massive and hard to believe really, seems to have got loads less media attention than Nick Leeson (think thats his name)

Its the equivalent of about half of all the gold and currency reserves held by France.

 

[Whiskers]

The plot thickens. The trader was first quizzed in Nov 07 and a director sold a million shares on Jan 9 and 10. Lawyers, angry shareholders and politicans and litigation coming from everywhere.

Seems to have caused a bit of a flap on Euro markets, but didn't seem to bother the US markets too much.

SocGen was warned about rogue trader last year
Mon Jan 28, 2008 1:46pm EST

PARIS (Reuters) - Exchange officials warned Societe Generale about rogue trader Jerome Kerviel's deals late last year, a Paris prosecutor said, piling pressure on the French bank to explain why the trades were not discovered earlier.

The bank has said it only found out 10 days ago that one of its junior traders had run up a staggering 50 billion euro wager on European share prices, forcing it to unwind the positions into sliding markets at a cost of 4.9 billion euros.

French President Nicolas Sarkozy also turned up the heat on the bank on Monday, saying its top managers would have to accept their share of responsibility for the world's biggest trading scandal.

"When there is an event of this nature, it cannot remain without consequences as far as responsibilities are concerned," Sarkozy told reporters while on a visit to a university.

http://www.reuters.com/article/newsOne/idUSL2422020620080128?pageNumber=1&virtualBrandChannel=0

 

[BIG BWACULL]

As for who's to blame :dunno:

Bumbling Bankers

Rogue Trader Update

On Friday we talked about Jerome Kerviel, the rogue trader who rocked the markets last week. Mr. Kerviel’s employer, Societe Generale, blamed him for $7.2 billion worth of losses. But as it turns out, things aren’t so simple as that.

The rogue trader’s losses were a mere €1.5 billion (US$2.2 billion) when the bad trades were found out. It was management’s frantic decision to dump the positions en masse that added $5 billion more to the tab.

The New York Times reports, “Société Générale rushed to unwind those trades during Monday’s market plunge, and trading in those futures contracts soared to record levels. The bank’s abrupt reversal contributed to a decline that snowballed into an avalanche of sell orders around the world, some traders said. The ensuing turmoil helped prompt the Federal Reserve to orchestrate the surprise cut in interest rates announced Tuesday.”

Funny, that. Who’d have thought a moody junior trader -- parked behind a sixth-floor desk in a nondescript corner of a French bank no less -- could force the hand of the Federal Reserve.

 

[BIG BWACULL]

This from the australian today

SOCIETE Generale is facing legal action from shareholders claiming the bank is involved in insider dealing as it emerged that a non-executive director at the French bank sold off nearly 100 million euro ($167 million) worth of SocGen shares eight days before the discovery of "irregular trades" made by "rogue trader" Jerome Kerviel.

:headshake:nono:

http://www.theaustralian.news.com.au/story/0,25197,23125230-20501,00.html

 

[dalek]

We are often treated to stories of wayward employees losing/defrauding large amounts of their employers cash, although not usually in this magnitude, but what about those that win ?? Surely they don't all lose it ?
Obviously they are not complete dills judging by the construct of their ploys to get hold of the money in the first place.
So, where are the winners ?
We'll probably never know, but I suspect it's a really nice place.

 

[nomore4s]

The plot thickens.

Read somewhere today that Kerviel's lawyers have hit back saying he's being used as a scapegoat to cover up SocGens losses with subprime.

Sorry no link atm.

 

[Timmy]

The plot thickens.

Read somewhere today that Kerviel's lawyers have hit back saying he's being used as a scapegoat to cover up SocGens losses with subprime.

Sorry no link atm.

you tease

 

[doctorj]

Google news is the place to go...
http://www.ft.com/cms/s/a0d5ca2c-cd28-11dc-9b2b-000077b07658.html
http://ap.google.com/article/ALeqM5g-Led3mqRdlkLzBZ413DQphV3uWAD8UF53082

 

[drillinto]

Further revelations dent SocGen’s reputation
By Financial Times(UK) reporters

Published: January 28 2008

Société Générale’s dented reputation took a further battering on Monday as French investigators claimed that the Eurex derivatives exchange raised the alarm last year over trading by Jérôme Kerviel, the man accused of masterminding banking’s biggest rogue trading scandal.

The news makes the positions of Daniel Bouton, SocGen chairman, and Jean-Pierre Mustier, head of corporate and investment banking, look increasingly shaky. A board meeting on Wednesday could decide their fates.

Nicolas Sarkozy, the French president, on Monday signalled his desire for change at SocGen, saying: “In a system of high rewards...no one can escape responsibility when there is a problem.”

Mr Bouton acknowledged that he would go if asked. A member of the bank’s board said Mr Bouton was kept on after last week’s revelation of a fraud that will cost SocGen €4.9bn ($7.2bn) in losses “to get through the crisis, and then he will be replaced”.

French banks, notably Crédit Agricole and BNP Paribas, are circling SocGen, gripped by a mixture of alarm and fascination at how the affair has made it vulnerable. However, any move is likely to be some months off. Mr Kerviel was on Monday preliminarily charged with breach of trust, falsifying documents and breaching IT controls.

However, one of his lawyers, Christian Charrière-Bournazel, said the investigating judges had rejected more serious charges of attempted fraud.

SocGen claimed Mr Kerviel took unauthorised positions on European futures markets for more than a year, leaving the bank with exposure of €50bn. The lender said he covered his tracks with fake hedging, which internal controls failed to detect.

Investigators said Eurex became concerned at the positions the junior trader was taking as early as November 2007. Prosecutors failed to specify just who was alerted by Eurex, and the exchange refused to comment beyond saying that “controls had functioned properly”.

It is understood Bafin, the German regulator, on Monday sent confirmation of the Eurex alert to French market regulators, who are investigating how SocGen’s controls were breached.

Reporting by Peggy Hollinger, John O’Doherty, Martin Arnold and Ben Hall in Paris; Peter Thal Larsen and David Oakley in London

 

[Timmy]

Google news is the place to go...
http://www.ft.com/cms/s/a0d5ca2c-cd28-11dc-9b2b-000077b07658.html
http://ap.google.com/article/ALeqM5g-Led3mqRdlkLzBZ413DQphV3uWAD8UF53082

Thanks doctorj.

 

[Timmy]

Mr Bouton acknowledged that he would go if asked.

Don't let the door hit you in the a*se on the way out.