Societe Generale on Thursday said it had suffered a rogue trader-type fraud costing €4.9bn. After further crunch-related provisions of €2bn, the French bank also said it would be raising €5.5bn in additional capital.
Here’s the key extract from Thursday’s statement:
Societe Generale Group (the Group) has uncovered a fraud, exceptional in its size and nature: one trader, responsible for plain vanilla futures hedging on European equity market indices, had taken massive fraudulent directional positions in 2007 and 2008 beyond his limited authority. Aided by his in-depth knowledge of the control procedures resulting from his former employment in the middle-office, he managed to conceal these positions through a scheme of elaborate fictitious transactions.
There is no residual exposure in relation to these positions, which were discovered and investigated on January 19th and 20th, 2008. It was decided to close these positions as quickly as practicable in the best interests of market integrity and the Group’s shareholders. Given the combination of the size of the positions and the very unfavourable market conditions encountered, this fraud has a negative impact of Euro 4.9bn that the Group has decided to recognise in its 2007 pre-tax income.
The trader’s positions have been reviewed and a thorough analysis of all his department’s positions confirmed the isolated and exceptional nature of this fraud. The employee who has confessed to the fraud has been suspended and a dismissal procedure has been initiated. The individuals in charge of his supervision will leave the Group.
Here’s the SocGen “presentation.” Page 11 caught our eye, in particular the line: “The fraud and the trading activities (excluding the one-off loss) have proved their resilience to the current difficult market conditions.”
But that’s probably just dodgy translation.
More on this to follow (!)