Paris-based trader Jérôme Kerviel blamed for fraud at Société Générale which cost the bank €4.9 billion (£3.6 billion) and forced it into an emergency €5.5 billion cash call on shareholders.
Kerviel, who worked on the bank’s European equities derivatives desk was called a “genius of fraud” by the governor of the Banque de France on Thursday.
SocGen Chief Executive Daniel Bouton said Kerviel's motivations were "totally irrational" but gave no further clues.
Investment fraud
The bank, France's second-largest, said Thursday it had learned of the fraud, the biggest in investment banking history, last weekend.
Described as a "brilliant" student by one of his former university teachers, Kerviel was involved in what the bank calls "plain vanilla," or the more basic forms of hedging, with limited authority.
The bank said he went far beyond his role, taking "massive fraudulent directional positions" in various futures contracts, betting at the start of this year that stock markets would rise. He apparently escaped detection by using knowledge of the bank's control systems gleaned in his earlier monitoring job.
Most of his positions went unnoticed by colleagues and superiors as Kerviel covered his tracks with what the bank described as a "scheme of elaborate fictitious transactions" but was caught when markets dropped, exposing him in contracts where he had bet on a rise.
Rights issue
The bank said it would need to raise about €5.5 billion in new capital, partly by selling shares in an emergency rights issue, underwritten by JPMorgan Chase & Co. and Morgan Stanley, that will leave its Tier One capital ratio higher than before at eight percent.
The price of the issue will be formally set after SocGen reports its results for 2007 next month.
January 25, 2008
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