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February 5, 2008

SocGen chairman blamed for defective controls

by Gill Montia

Story link: SocGen chairman blamed for defective controls

The head of Société Générale, the French bank at the centre of a rogue trader scandal, has been accused of ignoring warnings that could have prevented the loss of €4.9 billion.

The French Finance Minister, Christine Lagarde, has completed an official report into the activities of Jérôme Kerviel, in which she criticises the bank for having defective internal controls that allowed the trader to conduct unauthorised business worth €50 billion on European stock markets.

Mrs Lagarde states: “Very clearly, certain mechanisms of internal controls did not function and those that functioned were not always followed by appropriate modifications.”

The report also highlights the fact that the bank failed to act in November when Eurex, the clearing house, questioned Mr Kerviel’s dealings.

It levels strong criticism at the bank’s chairman, Daniel Bouton, as on two occasions he had been advised by the Bank of France that Société Générale’s internal security procedures were insufficient.

Mr Bouton’s position has been further compromised by his appearance in court, together with a group of other defendants, in a case involving money laundering.

Société Générale is one of four banks accused of enabling criminal activity by cashing cheques.

Meanwhile, the French government has indicated that it would support a bid for the bank, from either Crédit Agricole or BNP Paribas.

 

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