NEWS | Wednesday, 30 January 2008
David Darmanin
France based Société Générale (SocGen), one of the largest financial services companies in Europe, last week announced that 31-year-old Jérôme Kerviel, a futures trader employed by the bank, is being investigated for a deficiency amounting to €4.9 billion, the largest loss ever incurred due to the actions of one individual.
SocGen Chairman and CEO Daniel Bouton, in a public apology to the shareholders explained that Kerviel used “extremely varied and sophisticated techniques” to cover up simple transactions that he had been carrying out by hedging on the European Stock Market over the past year.
In the meantime, governor of the Bank of France Christian Noyer explained : “If there hadn’t been a collapse in the markets early in the week, the size of the loss would have been much smaller.”
Accused of fraudulent falsification of banking records, use of such records and computer fraud, Kerviel’s motives are still not clear as it appears that no personal profit was gained out of the fraud.
Soon after the scandal hit the media, shares in SocGen, which has a market capitalisation of about 36 billion euros, fell by more than 4 percent to €75.81.
Rumours of takeover quashed
Amid rumours that competitors BNP Paribas, Barclays or HSBC may be interested in placing a hostile bid on SocGen, the French government Tuesday categorically stated that the sale of the 144-year-old bank is not on the cards.
BNP Paribas had already placed an unsuccessful takeover bid for Société Générale in 1999. Since then the conational banking rivals have been denying any possibility of merging with Société Générale.
While serious doubts arose on how the accused trader could have acted single-handedly, one of Kerviel’s colleagues in SocGen’s Alicante building, explained how the accused took disproportionate positions on the Dow Jones Euro Stoxx 50 index and the German DAX in particular. In trying to undo Kerviel’s blunders, Société Générale seems to have rattled the German futures market.
A report on the International Herald Tribune reveals that “As Société Générale sought to unwind the positions Kerviel had built up, volume on the futures contracts soared. On Tuesday, the volume on the DAX and Euro Stoxx 50 contracts was twice that of open interest, suggesting that the bank was having to sell and then buy back contracts in order to cover the leveraged positions.”
CEO offers resignation
French PM Sarkozy implied that ultimately, the bank’s Chairman and CEO Daniel Bouton is to blame for the financial disaster. “When you have a fat salary, no doubt entirely legitimate, and then a big problem crops up, one cannot expect to wash one’s hands of responsibility,” Sarkozy said. Bouton’s offer to resign was refused by the bank’s board last week, Bouton instead decided to forgo his salary until June.
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When Chairman of the Malta Financial Services Authority (MFSA) Chairman Prof. Joseph V. Bannister was asked to explain what lessons are to be learnt for Malta, and whether there are any expected repercussions on financial services carried out locally, a spokesperson claimed that it is too early to tell.
“The alleged fraud is currently being investigated by the French regulator and the French authorities. A case of fraud does not necessarily imply a failure of the regulatory system. It is still too early to say whether the outcome of investigations, once properly analysed, would have regulatory repercussions in France or internationally,” he said. |
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30 January 2009
ISSUE NO. 520
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www.german-maltese.com
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