Société Générale scandal deepens

by Gill Montia

Story link: Société Générale scandal deepens

The scandal surrounding French bank, Société Générale, and its rouge trader Jérôme Kerviel, is deepening.

Mr Kerviel has admitted that he conducted secret deals worth billions of euros but maintains that despite a €5 billion loss, he was acting in the bank’s best interests. He also claims that other employees conduct business in a similar manner.

The bank will now have to answer to allegations of insider trading and claims that last November, it ignored a warning from the German Eurex exchange that Mr Kerviel’s activities were suspicious.

French banking experts and state officials are not convinced that Mr Kerviel could have outwitted Société Générale’s security system for a prolonged period, raising concerns that the bank turned a blind eye to some of the dealings of its traders.

The trader maintains that he took the risks to enhance his prospects of a large bonus for 2007 but was never involved in any form of fraud.

Astonishingly, when Mr Kerviel was questioned by his employer about Eurex’s allegations in November, faked documents that justified his actions were accepted as genuine.

It has also emerged via AMF, the Paris market regulator, that a member of Société Générale’s supervisory board sold shares worth €95 million two weeks before the Mr Kerviel’s actions hit the headlines.