Jérôme Kerviel and Société Générale
Jérôme Kerviel and Société Générale
In brief
Société Générale S.A. (SocGen) is a French multinational banking and financial services company headquartered in Paris. The company has a Corporate and Investment Banking division (Derivatives, Structured Finance and Euro Capital Markets).
In the summer of 2000, Kerviel joined the middle offices in the bank Société Générale. He was working in the compliance department. In 2005 he was promoted to the bank's Delta One products team in Paris where he was a junior trader. His role was to arbitrage futures contracts on stock market indexes
In January 2008, the bank Société Générale lost approximately €4.9 billion closing out positions over three days of trading beginning January 21, 2008, a period in which the market was experiencing a large drop in equity indices. The bank states these positions were fraudulent transactions created by Jérôme Kerviel. The police stated they lacked evidence to charge him with fraud and charged him with breach of trust and illegally accessing computers. Kerviel states his actions were known to his superiors and that the losses were caused by panic selling by the bank.
Why did the incident happen?
On the 24th of January 2008, Société Générale organized a press conference to unveil the case of which they are victims. According to the CEO, a market operator, member of his team, had exposed the bank to market risk even though he was not entitled to; the bank has accused him of exceeding his authority to engage in unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. He had accumulated long positions with high leverage in futures contracts on stock market index and concealed the transactions by inserting fictitious opposite transactions into the computer system of SocGen.
The bank said that whenever the fake trades were questioned, Kerviel would describe it as a mistake then cancel the trade followed by replacing that
In brief
Société Générale S.A. (SocGen) is a French multinational banking and financial services company headquartered in Paris. The company has a Corporate and Investment Banking division (Derivatives, Structured Finance and Euro Capital Markets).
In the summer of 2000, Kerviel joined the middle offices in the bank Société Générale. He was working in the compliance department. In 2005 he was promoted to the bank's Delta One products team in Paris where he was a junior trader. His role was to arbitrage futures contracts on stock market indexes
In January 2008, the bank Société Générale lost approximately €4.9 billion closing out positions over three days of trading beginning January 21, 2008, a period in which the market was experiencing a large drop in equity indices. The bank states these positions were fraudulent transactions created by Jérôme Kerviel. The police stated they lacked evidence to charge him with fraud and charged him with breach of trust and illegally accessing computers. Kerviel states his actions were known to his superiors and that the losses were caused by panic selling by the bank.
Why did the incident happen?
On the 24th of January 2008, Société Générale organized a press conference to unveil the case of which they are victims. According to the CEO, a market operator, member of his team, had exposed the bank to market risk even though he was not entitled to; the bank has accused him of exceeding his authority to engage in unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. He had accumulated long positions with high leverage in futures contracts on stock market index and concealed the transactions by inserting fictitious opposite transactions into the computer system of SocGen.
The bank said that whenever the fake trades were questioned, Kerviel would describe it as a mistake then cancel the trade followed by replacing that