SocGen's $7.7bn Trading Fiasco - Main Points From Report
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Here are a few of the interesting points that have emerged:
The report itself is 71-pages long, and investigators interviewed 315 people in the US, Europe and Asia-Pac in an effort to get to the bottom of what went on.
Jerome Kerviel, the so-called 'rogue trader' at the centre of the affair, amassed some $78.7bn in unauthorized futures positions at the bank.
Kerviel's supervisors are said to have failed 'to react in an appropriate manner to several alert signals'. They are said to have missed at least 1,071 bogus trades. There were 115 occasions that involved 'the entry of pairs of fictitious reverse transactions'.
Unwinding the positions cost SocGen a cool $7.7bn. The loss is the largest trading loss in financial markets history (to date), and wiped out almost two years of the bank's investment banking business profits in the process.
The trader started to take unauthorized positions in 2005, and continued to hide what he was doing until he was confronted by bank officials on January 18th, 2008.
15% of the trades were registered by Kerviel's trading assistant, leading some to feel that this person, who no longer works at the bank, was involved in the scandal. The bank was unable to interview this person for the report because of the ongoing criminal investigation.
If found guilty of fraud, Kerviel faces up to 5 years in jail. SocGen has said that it will spend up to $158m this year improving its risk systems.
Sources - Bloomberg, Financial News, International Herald Tribune, Reuters, The Wall Street Journal
