Is Jerome Kerviel SocGen’s Scapegoat?

Scanning through the news a few days back I came across a story about a familiar name in the world of trading and that name is Jerome Kerviel. Kierval was jailed in 2010 for a 4.9 billion Euro trading loss which occurred between 2007 and 2008. However a couple of days ago it was announced that this ‘Leeson-esque’ type character is starting his appeal after he claims that the bank that he worked for (Societe Generale, one of France’s most largest and respected establishments) were fully aware of the 4.9 billion position that they found themselves in. He states that in the four weeks before his arrest the company knew about him exceeding his mandate as he placed more risky bets to try and recoup the money that he had initially lost.

Here’s my humble two penneth worth…

Obviously Kierval is no angel in this and he is unlikely to come out of this whole fiasco smelling of roses. However, I for one cannot believe that the bank didn’t have an inkling of what was going on. Having read ‘Rogue Trader’ the Nick Leeson biography I was amazed at the amount of freedom and trust that the bank placed on him. However that was back in 1994 and since the collapse of Bearings, strict control measures have been put in place. Therefore to say that SocGen deny any knowledge of Kierval’s financial disasters is absolutely ludicrous. Have they used him as a scapegoat? Well I’ll let you make up your own minds on that one.

In response to these allegations, the bank’s head of risk operations Claire Dumas stated that the “Policy of the lenders is to display total trust in the traders” and that “this is important”. She goes on to state that “All personnel are expected to voluntarily explain their boss when they stray outside of their limits, and in 99.9 percent of cases do so and return within these boundaries”.

Maybe by “displaying total trust in their traders” it’s another way of saying that they wash their hands of any responsibility should it all go a little ‘pear shaped’. Herein (I believe) lies the problem.

I have a funny feeling that Societe General are going to come out of this whole fiasco sitting pretty whilst Jerome Kieval will do his time in prison. Don’t get me wrong, clearly Kierval is certainly no angel in all of this, but then again neither is the bank. Anyway I will most definitely watch this space and keep you posted!

Although this happened back in 2008 any news can affect the markets and this is why economic calendars provide up to date information on what’s happening around the world. Any trader whether they are trading online or in the city needs to keep abreast of the situation in order to make informed business decisions. For this reason being ‘news current’ is vital.

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