French banking bosses are scrambling to restore battered confidence after a junior trader disappeared amid the biggest bank fraud in history. Jerome Kerviel became France’s most-wanted man after losing five billion euros at Societe Generale. His lawyer Elisabeth Meyer insisted he is not on the run and will answer any questions.
It is thought Kerviel racked up his enormous losses using his insider’s knowledge of the bank’s risk controls. The huge losses came to light as he tried to cover up the disaster.
Economist Marc Touati blamed human weakness, but said it was hard to believe that a single junior trader at a major bank like Societe Generale could evade detection while losing so much money for so long. Perhaps, he said, the failure of the security controls is more worrying.
The bank’s CEO Daniel Bouton was shocked, but insisted Kerviel was acting alone.
“The first thing is that we are very sorry that this thing has happened,” he said. “Second, this is a totally one-shot exceptional loss coming from a fraud.”
The affair has revived memories of the ‘Man who Broke the Bank’ thirteen years ago. Singapore futures trader Nick Leeson lost more than a billion euros, and brought down Barings Bank in a similar series of failed bets in 1995.
Leeson’s exploits were immortalised in a Hollywood film. But for Societe Generale and the wider banking industry, already battered by the global credit crisis, this rogue trader’s legacy is all too real.