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
Date Written: October 15, 2010
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
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