Jerome Kerviel Crushes Bank Societe Generale (Part9)
Backhttp://st0ckman.blogspot.com In one of the banking world's most unsettling recent disclosures, France's Société Générale SA said Mr. Kerviel had cost the bank €4.9 billion, equal to $7.2 billion, by making huge unauthorized trades that he hid for months by hacking into computers. The combined trading positions he built up over recent months, say people close to the situation, totaled some €50 billion, or $73 billion. Jerome Kerviel The loss -- dwarfing the $1.3 billion Nick Leeson cost British bank Barings in 1995 -- has forced Société Générale to seek a capital infusion. It is expected to try to raise €5.5 billion, chiefly from its existing shareholders. The loss exposes the latest breakdown of risk controls at a big international financial institution, along with U.S. banks that have hemorrhaged billions of dollars since the crisis in subprime mortgages developed last summer. Some analysts speculate that the French bank's frantic efforts to unwind the unauthorized trades over 72 hours may have contributed to the volatility and declines that rattled European markets on Monday. In addition to the billions, Société Générale appeared for a time to have lost Mr. Kerviel as well. Executives at the bank, still stunned at the magnitude of the scandal, told reporters yesterday they hadn't kept track of his whereabouts since questioning him on Saturday. [Image] Former Barings futures trader Nick Leeson in November 1995. Here's a look at stories in the Journal over the past decade on trades gone bad, and an accompanying photo gallery above. • Behind a $550 Million Bad Bet: A Mystical Man With Ambition(CAO Singapore, 2004) • Junior Staffers Cited for Stopping National Australia Bank Scandal(2003) • Allied Irish Banks Say a Rogue Trader Lost $750 Million in Unauthorized Deals(2001-2002) • Sumitomo Trading Scandal Still Haunts Copper Market(1996) MORE • Deal Journal:Who Are You, Jerome Kerviel? • Daily Davos:Massive Trading Loss Is Talk of the Town But an attorney at a law firm representing Mr. Kerviel said the trader had spent much of the week with his lawyer. Asked whether Mr. Kerviel rejects the banks' accusations, the lawyer said only: "He is not on the run. He is standing by to answer to justice. He spent the day at our office." Early details, including accounts from executives at the French bank, paint a picture of an ordinary trader who used extraordinary means to game the bank's own system and hide massive unauthorized trades on stock-index futures. Even as bank executives were scrambling to deal with the trail of destruction, they were at a loss to describe his motivations. Société Générale executives said that the early investigation indicated the trader didn't earn a dime on his actions. They also said he appeared to be acting alone. Mr. Kerviel essentially made bets on which way large European stocks would move, in one of the most liquid markets linked to equities globally. His expertise was trading futures tied to baskets of stocks such as the Euro Stoxx 50. In normal markets, some $40 billion to $50 billion of the futures of that index trade daily. The index gives traders such as pension and hedge funds quick access to a large swath of the European economy, by investing on the belief the index will rise or fall to a certain point in the future. Mr. Kerviel also made trades in Germany's DAX Index and France's CAC-40. According to Mr. Bouton, the Société Générale chairman, Mr. Kerviel began conducting fraudulent trades sometime in 2007.
Category: News
Uploaded: January 29th, 2008 @ 8:24 pm
Author: st0ckman
Length: 09:31
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Tags: fraud general generale jerome kerviel leeson market movers nick ove pre rogue societe society stock take trader trading
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