22 August 2017
Visit http://response.ncr.com

Rogue trader costs Société Générale EUR5bn - back office controls skirted

24 January 2008  |  13595 views  |  0 Societe Generale

French banking group Société Générale (SocGen) is reporting a massive EUR4.9 billion in losses perpetrated by a rogue trader who used to work in its middle office division and who used loopholes in controls and risk management procedures to conceal fictitious transactions.

In a statement SocGen, which is France's second biggest bank, says the "exceptional fraud" was perpetuated by one trader who was responsible for plain vanilla futures hedging European equity market indices and had taken "massive fraudulent directional positions" in 2007 and 2008 that were "beyond his limited authority".

The bank says the junior trader - who hasn't been named, but who earned less than EUR100,000 a year - had "in-depth knowledge" of risk control procedures from his previous position in the bank's middle office, which enabled him to "conceal these positions through a scheme of elaborate ficticious transactions".

SocGen says it no longer has exposure to the trader's positions, which were identified and analysed on 19 and 20 January 2008 and quickly closed, just before the markets around the world crashed on 21 January.

The trader has confessed to the fraud, says SocGen and has been suspended pending a dismissal procedure. His supervisors are also leaving the bank. SocGen Chairman and CEO Daniel Bouton also offered his resignation but it was rejected by the bank's board.

Meanwhile, the Bank of France has said it will launch an inquiry into the fraud.

The incident has thrown up inevitable comparisons with UK rogue trader Nick Leeson who caused the collapse of Barings Bank in 1995 by racking up $1.3bn in derivatives trading losses. However Leeson's losses are only around a quarter of the $7.16 billion lost by SocGen in this case.

The fraud losses - combined with EUR2.05 billion in losses and write-downs related to exposure to the credit crunch - has forced SocGen to seek EUR5.5 billion in emergency funding from a capital increase to bolster its balance sheet.


According to a Financial Times report, the lone rogue trader that racked up the colossal losses at SocGen is Jérome Kerviel, 30, who joined the bank in 2000.

Kerviel worked in the bank's back office for three years before being promoted two years ago to SocGen's Delta One trading desk in Paris, says the report.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

CapGemini inks Société Générale contract

CapGemini inks Société Générale contract

18 January 2008  |  8416 views  |  0 comments
Société Générale and La Banque Postale form e-payments venture

Société Générale and La Banque Postale form e-payments venture

10 January 2008  |  12618 views  |  0 comments
Rogue trader Leeson gets online gambling bug

Rogue trader Leeson gets online gambling bug

09 January 2006  |  15260 views  |  0 comments

Related company news

visit www.dorsum.eudownload the paper nowvisit www.worldpaymentsreport.com

Top topics

Most viewed Most shared
Mobile contactless spending accelerating in UKMobile contactless spending accelerating i...
12499 views comments | 26 tweets | 23 linkedin
Barclays pairs banking data with third party apps for SmartBusiness DashboardBarclays pairs banking data with third par...
11045 views comments | 22 tweets | 34 linkedin
hands typing furiouslyWhy Is Risk Analytics Important?
10269 views 0 | 6 tweets | 1 linkedin
RBS to bring Silicon Valley to EdinburghRBS to bring Silicon Valley to Edinburgh
10210 views comments | 10 tweets | 8 linkedin
Australia regulates digital currenciesAustralia regulates digital currencies
10141 views comments | 21 tweets | 34 linkedin

Featured job

Competitive base and bonus, plus benefits
London, UK

Find your next job