January 24, 2008 - 4:41pm
A 4.9 billion-euro ($7.2 billion) trading loss was announced by Société Générale SA, the Paris-based bank, that became famous for the biggest loss in financial history. The internal investigation revealed that the name of Société Générale's incredible losses was Jerome Kerviel, trader. Mr.Kerviel joined SG just five years ago, with three of them spent in backroom operations. Being oft 31 years old and described as a computer genius, the "Grinch" earned £75,000 a year and was responsible for plain vanilla futures hedging on European equity market indices; however, he has not been yet fired. Being under an indescribable pressure, the Société Générale Chairman and Chief Executive Daniel Bouton said: "If he escapes he will be found - there is no doubt about it." Despite extra large amounts involved, the fraud went unnoticed for three days. Five or six senior traders who supposedly had to supervise Mr.Kerviel have left the company. Currently the Bank of France, the country's banking regulator, is investigating the alleged fraud. Parisian police was informed three days later after the fraud was finally unveiled. Mr.Bouton commented as follows: "My duty was to avoid adding to the terrible consequences of this fraud."
"The transactions built on fraud were simple, basing on positions linked to rising stock markets, but they were hidden beneath extremely sophisticated and varied techniques,'' Bouton said in a letter posted on the bank's Web site. "His approach was to balance every real trade with a fictitious one, and his "intimate and perverse" knowledge of the bank's controls allowed him to avoid detection", co-Chief Executive Officer Philippe Citerne told reporters. "He rolled over his real trades before they reached maturity".
The bank announced that its full-year profit would fall to £450-600 million from £3.72 billion registered before the discovered fraud. Now Société Générale plans to raise 5.5 billion euros through a capital increase to prop up its balance sheet. As a result of the fraud, Société Générale shares fell 3.27 euros, or 4.1 percent, to 75.81 euros in Paris trading, causing an overall decline to 23% within this year.
A 4.9 billion-euro ($7.2 billion) trading loss was announced by Société Générale SA, the Paris-based bank, that became famous for the biggest loss in financial history. The internal investigation revealed that the name of Société Générale's incredible losses was Jerome Kerviel, trader. Mr.Kerviel joined SG just five years ago, with three of them spent in backroom operations. Being oft 31 years old and described as a computer genius, the "Grinch" earned £75,000 a year and was responsible for plain vanilla futures hedging on European equity market indices; however, he has not been yet fired. Being under an indescribable pressure, the Société Générale Chairman and Chief Executive Daniel Bouton said: "If he escapes he will be found - there is no doubt about it." Despite extra large amounts involved, the fraud went unnoticed for three days. Five or six senior traders who supposedly had to supervise Mr.Kerviel have left the company. Currently the Bank of France, the country's banking regulator, is investigating the alleged fraud. Parisian police was informed three days later after the fraud was finally unveiled. Mr.Bouton commented as follows: "My duty was to avoid adding to the terrible consequences of this fraud.""The transactions built on fraud were simple, basing on positions linked to rising stock markets, but they were hidden beneath extremely sophisticated and varied techniques,'' Bouton said in a letter posted on the bank's Web site. "His approach was to balance every real trade with a fictitious one, and his "intimate and perverse" knowledge of the bank's controls allowed him to avoid detection", co-Chief Executive Officer Philippe Citerne told reporters. "He rolled over his real trades before they reached maturity".
The bank announced that its full-year profit would fall to £450-600 million from £3.72 billion registered before the discovered fraud. Now Société Générale plans to raise 5.5 billion euros through a capital increase to prop up its balance sheet. As a result of the fraud, Société Générale shares fell 3.27 euros, or 4.1 percent, to 75.81 euros in Paris trading, causing an overall decline to 23% within this year.
Marianna, reporter of Ecommerce Journal