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France

Kerviel fraud could have collapsed markets, SocGen insider says

Text by FRANCE 24

Latest update : 2010-10-07

As the full extent of Jerome Kerviel’s losses became clear, Societe Generale officials immediately sought to limit the damage by going to the regulators before the authorities, the bank’s former communications boss tells FRANCE 24.

Shortly after rogue trader Jerome Kerviel’s massive irregular trading activities became clear to senior officials at Societe Generale, the bank immediately sought to downplay the 4.9 billion euro losses incurred in order to prevent mass panic on the markets, according to Societe Generale’s former communications director.

In an interview with FRANCE 24 on Wednesday, Hugues Le Bret said senior Societe Generale executives such as former CEO Daniel Bouton informed financial regulators before going to the authorities and making the huge losses public.

“Daniel Bouton’s first reaction was to speak to the regulators,” he said. “This was done well before the country’s political leaders were told of the losses.

“If this affair had been made public, the ensuing panic would have caused a shock to the global financial system.”

Le Bret’s new book, “The Week When Jerome Kerviel Failed to Bring Down the Global Financial System,” was published in French a day after a Paris court found Kerviel guilty of forgery, breach of trust and entering fraudulent data into computers. The court sentenced the so-called "rogue trader" to five years in prison, including two suspended, and ordered him to pay his former employer 4.9 billion euros in damages.

The book provides an insider’s account of how senior executives at France’s second-largest bank handled the crisis and attempted to avoid “systemic risk”, or a run on the banks.

Le Bret’s lucid, insider’s account is a far cry from the talking points the former Societe Generale communications director stuck to during his press interviews after the scandal broke out.

‘Monstrous that he showed no remorse’

But even though he has resigned from his latest post as CEO of the Societe Generale subsidiary, Boursorama, an online financial services company, Le Bret’s scathing criticism of Kerviel’s actions mirrors that of current senior executives at the French bank.

Branding Kerviel’s actions as “monstrous,” Le Bret noted that Kerviel “built such positions without the knowledge of his superiors,” and that it was “monstrous that he (Kerviel) cast aspersions on his colleagues, monstrous that he showed no remorse.”

But Le Bret told FRANCE 24 he believed the Paris court got it right in ruling that Kerviel acted without the knowledge - tacit or otherwise - of his superiors. According to Le Bret, the young trader exploited weaknesses in the system to place his illegal positions.

“No system is perfect, and weaknesses and therefore frauds still exist, but I hope as many of the existing weaknesses in the system can be identified as soon as possible,” he said.

 

Date created : 2010-10-07

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