French rogue trader loses bank €4.9bn
The second-biggest bank in France admitted today it has lost €4.9bn through a junior rogue trader who gambled it away on the world’s markets.
Societe Generale said the futures trader fooled investors and overstepped his authority.
The fraud has rocked the bank which is already suffering through the subprime crisis, forcing it to seek new capital of more than €5.3bn.
Trading in Societe Generale’s shares, which have lost nearly half their value over the past six months, was suspended on the Paris bourse. It was unclear when it would resume.
The bank said it detected the fraud at its French markets division last weekend.
In a statement announcing the discovery, it called the fraud “exceptional in its size and nature".
It said a trader at the futures desk had misled investors in 2007 and 2008 through a “scheme of elaborate fictitious transactions".
The trader, who was not named, used his knowledge of the group’s security systems to conceal his actions.
When confronted he confessed to the fraud, the bank said, and was being questioned along with his supervisors.
Society Generale was founded in 1864 and is one of France’s leading companies, but the crisis could weaken it sufficiently to make it a takeover target.
Chief executive Daniel Bouton has offered his resignation but it was rejected by the board.
An analysis confirmed the “isolated and exceptional nature” of the fraud, the bank said.
The fraud appeared to be the largest ever by a single trader far outstripping the Nick Leeson trading scandal in 1995 that bankrupted British bank Barings.
Barings collapsed after Leeson, the bank’s Singapore general manager of futures trading, lost £860 m (€1.1bn) on Asian futures markets, wiping out the bank’s cash reserves. The company had been in business for more than 230 years.
The Bank of France said it was immediately informed of the fraud and was investigating. The French market regulator said it had no comment. France’s Banking Federation also declined to comment.
