Bank trading scandal no effect on French financial system: Sarkozy
25 January, 2008
NEW DELHI (AFP) - The 4.9 billion euro (7.15 billion dollar) rogue trader scandal at Societe Generale does not affect the "solidity and reliability of France's financial system," President Nicolas Sarkozy said Friday.
"This was internal fraud... which does not affect the solidity and reliability of France's financial system," Sarkozy said in a news conference in New Delhi, where he is on a state visit.
Societe Generale announced Thursday a single trader who fooled his bosses carried out a massive 4.9 billion euro fraud -- one of the biggest scams in financial history.
The bank's chief executive and chairman Daniel Bouton said the rogue trader had used "extremely sophisticated and varied techniques" to carry out "fraud of a considerable scope" and that he "had the intelligence to escape all control procedures."
Societe Generale shares rose 2.95 percent to 78.05 euros in early trade Friday after being down 4.14 percent at the close Thursday, when the bank said it had also suffered a 2.0-billion-euro loss stemming from the crisis in the US subprime mortgage market.
French newspapers expressed shock over the loss, with many also expressing concern over its possible wider impact on confidence in the banking system.
"Societe Generale: the shock which stupefied the banking world," screamed the headline of the business daily Les Echos.
France's other business daily, La Tribune, berated Societe Generale and other banks for failing to tighten up financial controls despite earlier scandals and investing huge sums in computerised control systems.
"How could a bank of such calibre reputed for its experience on financial markets end up in this mess? Why did it take so long to uncover the damage?" the newspaper asked.
Societe Generale announced on Thursday that a rogue trader, identified by bank sources as 31-year-old Jerome Kerviel, had caused the losses by taking out "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority."
It insisted the trader had acted alone and said he was able to hide the losses due to experience of having worked in the section which monitors traders.
"In the case of Societe Generale, the conclusion one reaches after having carefully considered the matter, that between the bank and the employee, the more crazy of the two is not the one that you first thought," said La Tribune.
For Le Figaro the crux of the matter was "that which was presented as fraud in reality exposes risk control systems as dangerously weak."
Furthermore, the incident "carries a bad germ much more harmful, in reinforcing the climate of weakness which, since the beginning of the subprime crisis, has ruined the reputation of the financial world."
With many newspapers carrying comments of bankers and experts incredulous that one trader alone could amass such losses and hide them for so long, Les Echos warned doubts about the incident could prove damaging.
"... if the numerous questions which remain unanswered are not rapidly cleared up, it could damage the credibility of all the banking system."
Le Figaro said "it is already evident that Societe Generale cannot escape this crisis unscathed. It may even lose its independence."
Destabilised and having lost 40 percent of its value over the past six months, "the punishment most probable is likely to be losing its independence," Les Echos concurred.
"If its old competitor BNP Paribas doesn't seize the occasion, it is a strong bet that another big European bank, like Italy's UniCredit ... will grab it."
End.
|
