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Societe Generale fraud - how could it happen?


Societe Generale fraud - how could it happen?


As more details have emerged about the world’s worst rogue trading scandal, tough questions are being asked on how five billion euros could be lost through fraud at one of Europe’s leading banks – Societe Generale. In Paris, staff arriving for work took it in their stride. One said: “The bank is in a good state, this was just an accident that happened.”

The bank said 31-year-old trader Jerome Kerviel used his knowledge of the system to circumvent its sophisticated anti-fraud measures. Economics professor Andre Tiran said: “It’s like a locksmith becoming a burglar; if he was well trained as a locksmith its much easier for him to carry out burglaries.”

Comparisons have been made with rogue trader Nick Leeson, who caused the collapse of Britain’s Barings Bank in 1995. Similar actions by a currency trader at Allfirst bank of Baltimore cost its parent company Allied Irish Bank 475 million euros.

When Nick Leeson’s fraud was discovered he went on the run. Jerome Kerviel’s whereabouts are unknown, but a lawyer claiming to act for him said he has not disappeared and is available to co-operate with investigators.

One Societe Generale customer said it seemed strange that the trader was able to do what he did: “Their security seems to be insufficient, because when I want to do something they demand lots of things, like a ton of paperwork and ask me so many questions. Given that, it doesn’t seem possible to me that one person could lose so much money. I don’t know if we’re being told the truth, but maybe one day we’ll know.”

Commenting for first time, President Nicolas Sarkozy said the scandal does “not affect the solidity and reliability of the French system” but it has dealt a new blow to the image of the banking industry already reeling from the subprime crisis.

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