French Disconnection - 'Terrorist' Trader is Toast, Bank Relatively Unscathed Despite Risk-Taking Culture and Glaring Lack of Controls

New York State Bar Assoc. Securities Litigation and Arbitration, Forthcoming

14 Pages Posted: 13 Oct 2011 Last revised: 11 Apr 2012

See all articles by Edward Pekarek

Edward Pekarek

Pace Law School

Bryn Nicole Fuller

affiliation not provided to SSRN

Date Written: October 15, 2010

Abstract

Well before the failures of Bear Stearns and Lehman Brothers, and well after the collapse of Barings Bank and the scandals involving Allied Irish Banks (AIB) and Vienna-based BAWAG bank, along with its imploded U.S. trading partner and co-conspirator, Refco, financial markets were somehow surprised to learn billions in trading losses were realized by Société Générale ('Soc-Gen'), the result of proprietary trades made by the now 32-year-old Jérôme Kerviel, a bank trader who exposed SocGen to €50B ($69B) in uncovered trading activity that inexplicably went undetected for years. Much like the original 'Rogue Trader,' Barings’ Nick Leeson, Mr. Kerviel was from a working class upbringing and learned how to conceal leveraged losses from supervisors using knowledge he gained as a former low level back-office employee.

Keywords: Société Générale (“Soc-Gen”), BAWAG, UBS, Barings Bank, Allied Irish Banks, Refco, UBS, rogue trader, Leeson, Kerviel, Adoboli, Flöttl, Delta One, moral hazard, Pekarek

Suggested Citation

Pekarek, Edward and Fuller, Bryn Nicole, French Disconnection - 'Terrorist' Trader is Toast, Bank Relatively Unscathed Despite Risk-Taking Culture and Glaring Lack of Controls (October 15, 2010). New York State Bar Assoc. Securities Litigation and Arbitration, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1942753 or http://dx.doi.org/10.2139/ssrn.1942753

Edward Pekarek (Contact Author)

Pace Law School ( email )

80 North Broadway
White Plains, NY 10603
United States

HOME PAGE: http://www.pace.edu/page.cfm?doc_id=31582

Bryn Nicole Fuller

affiliation not provided to SSRN ( email )

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