This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7206270.stm
The article has changed 27 times. There is an RSS feed of changes available.
| Version 18 | Version 19 |
|---|---|
| Rogue trader to cost SocGen $7bn | Rogue trader to cost SocGen $7bn |
| (10 minutes later) | |
| French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn). | French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn). |
| The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques". | The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques". |
| It also announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US. | It also announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US. |
| The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank. | The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank. |
| Leeson was sentenced to six-and-a-half years in jail. | |
| Societe Generale's shares, which were suspended in the morning, lost 3.6% when they resumed trading. | |
| 'Alone' | 'Alone' |
| According to FT newspaper's Alphaville website, the trader's name is Jerome Kerviel, a 31-year-old trader who worked in the bank's Delta One products team in Paris. | |
| Societe Generale declined to comment on the report. | Societe Generale declined to comment on the report. |
| The sheer scale of the loss is overpowering Robert Peston, BBC business editor Read Robert's report in fullHow traders turn rogue | The sheer scale of the loss is overpowering Robert Peston, BBC business editor Read Robert's report in fullHow traders turn rogue |
| But the bank did confirm that the trader was a Frenchman in his 30s who joined the bank in 2000 and earned a salary and bonus of less than 100,000 euros. | But the bank did confirm that the trader was a Frenchman in his 30s who joined the bank in 2000 and earned a salary and bonus of less than 100,000 euros. |
| He was responsible for betting on the markets' future performance, bank executives said. | He was responsible for betting on the markets' future performance, bank executives said. |
| "I'm convinced he acted alone," said Jean-Pierre Mustier, chief executive of the corporate and investment banking division, who interviewed the trader after the fraud was uncovered. | "I'm convinced he acted alone," said Jean-Pierre Mustier, chief executive of the corporate and investment banking division, who interviewed the trader after the fraud was uncovered. |
| Societe Generale said the trader had taken what it called "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority". | Societe Generale said the trader had taken what it called "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority". |
| Executives said the trader may not have sought personal gain from the fraudulent deals. | Executives said the trader may not have sought personal gain from the fraudulent deals. |
| The fraud is an extraordinary echo of the rogue trader, Nick Leeson, who caused the collapse of Barings Bank in 1995, says BBC business correspondent Nils Blythe. | The fraud is an extraordinary echo of the rogue trader, Nick Leeson, who caused the collapse of Barings Bank in 1995, says BBC business correspondent Nils Blythe. |
| But the losses uncovered by Barings bosses totalled just £860m - about a quarter of the amount lost by Societe Generale. | But the losses uncovered by Barings bosses totalled just £860m - about a quarter of the amount lost by Societe Generale. |
| 'Secret trade' | 'Secret trade' |
| The bank, one of France's largest, will need to seek 5.5bn euros in new capital to offset the losses. | The bank, one of France's largest, will need to seek 5.5bn euros in new capital to offset the losses. |
| SOCIETE GENERALE IN FIGURES Founded in 1864467bn euros in assets under management (as of June 2007)22.5m customers worldwide120,000 employees in 77 countries href="http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/shares/1/15135/default.stm">Societe Generale's share price But it said it would still make a profit of 600m to 800m euros for 2007, despite the blow to its balance sheet. | |
| The bank said the trader responsible for the fraud had "in-depth knowledge of the control procedures resulting from this former employment in the middle-office". | The bank said the trader responsible for the fraud had "in-depth knowledge of the control procedures resulting from this former employment in the middle-office". |
| "The transactions which involved the fraud were simple - taking a position on shares rising - but hidden using extremely sophisticated and varied techniques," chief executive Daniel Bouton said in a letter to the bank's customers. | "The transactions which involved the fraud were simple - taking a position on shares rising - but hidden using extremely sophisticated and varied techniques," chief executive Daniel Bouton said in a letter to the bank's customers. |
| The bank said that the trader had confessed to the fraud and was being dismissed. His managers were to leave the bank as well. | The bank said that the trader had confessed to the fraud and was being dismissed. His managers were to leave the bank as well. |
| "I am sorry but I have a hard time buying the fact that a trader was able to set up a 'secret trade' of 4.9 billion without anybody finding out," said Ion-Marc Valhi at Amas Bank. | "I am sorry but I have a hard time buying the fact that a trader was able to set up a 'secret trade' of 4.9 billion without anybody finding out," said Ion-Marc Valhi at Amas Bank. |
| Frederic Hamm, fund manager at Agilis Gestion, believes that the fraud "impacts the reputation of the bank". | Frederic Hamm, fund manager at Agilis Gestion, believes that the fraud "impacts the reputation of the bank". |
| Mr Bouton offered his resignation but it was rejected by the board, the bank said. | Mr Bouton offered his resignation but it was rejected by the board, the bank said. |
| Richard Fuld, the chairman of Lehman Brothers, told BBC News in Davos that "nothing stuns me, nothing really surprises me these days." | Richard Fuld, the chairman of Lehman Brothers, told BBC News in Davos that "nothing stuns me, nothing really surprises me these days." |
| 'Unprecedented event' | 'Unprecedented event' |
| The bank's losses have seriously dented its profits for 2007. | The bank's losses have seriously dented its profits for 2007. |
| SOME MAJOR BANK FRAUDS 2008: Societe Generale, alleged fraud by a trader, 4.9bn euros loss2002: former currency trader accused of hiding $691m in losses at Allfirst bank of Baltimore1995: UK's Barings Bank collapsed after a trader Nick Leeson lost £860m ($1.28bn at the time) on futures trades | SOME MAJOR BANK FRAUDS 2008: Societe Generale, alleged fraud by a trader, 4.9bn euros loss2002: former currency trader accused of hiding $691m in losses at Allfirst bank of Baltimore1995: UK's Barings Bank collapsed after a trader Nick Leeson lost £860m ($1.28bn at the time) on futures trades |
| The company will announce its full year results on February 21, and it said that it expects its 2007 net income to be in the range of 600m-800m euros. | The company will announce its full year results on February 21, and it said that it expects its 2007 net income to be in the range of 600m-800m euros. |
| Shares in Societe Generale have fallen by nearly 50% in the past six months. | Shares in Societe Generale have fallen by nearly 50% in the past six months. |
| Societe Generale is also going to raise 5.5bn euros through a capital increase "to strengthen its capital base". | Societe Generale is also going to raise 5.5bn euros through a capital increase "to strengthen its capital base". |
| Meanwhile, another French bank, BNP Paribas, said that "it has not revealed any loss of item that would justify any particular warning to the market". | Meanwhile, another French bank, BNP Paribas, said that "it has not revealed any loss of item that would justify any particular warning to the market". |
| Gilles Glicenstein, BNP Paribas Investment Partners chief executive, suggested that "there is still some information missing to understand what happened" at Societe Generale. | Gilles Glicenstein, BNP Paribas Investment Partners chief executive, suggested that "there is still some information missing to understand what happened" at Societe Generale. |
| "Because the scale of the fraud is so large, there must be a complex explanation... For Societe Generale, it's an unprecedented event," he added. | "Because the scale of the fraud is so large, there must be a complex explanation... For Societe Generale, it's an unprecedented event," he added. |
| Mr Glicenstein also said it was not good news for banks in general, as "it can create doubt". | Mr Glicenstein also said it was not good news for banks in general, as "it can create doubt". |
| "In other periods, this type of news was hidden, but today, there is a tendency to reveal everything and maybe it's by revealing everything that confidence can return," he said. | "In other periods, this type of news was hidden, but today, there is a tendency to reveal everything and maybe it's by revealing everything that confidence can return," he said. |
| French Prime Minister Francois Fillon said that Societe Generale "has taken serious measures to cope with the situation". | French Prime Minister Francois Fillon said that Societe Generale "has taken serious measures to cope with the situation". |
| "I note too that the Bank of France has indicated that there is no reason to have any worries about the health of this bank and I am happy with that," he added. | "I note too that the Bank of France has indicated that there is no reason to have any worries about the health of this bank and I am happy with that," he added. |
| Have you been affected by this story? Are you a trader or do you work in Societe Generale? Do you know the trader concerned? Send us your comments using the form below: | Have you been affected by this story? Are you a trader or do you work in Societe Generale? Do you know the trader concerned? Send us your comments using the form below: |
| Name | Name |