£3.6 Billion fraud at Société Générale

Discussion in 'Current Affairs, News and Analysis' started by Idrach, Jan 24, 2008.

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  1. Of course - the Frogs will never let them go bust

  2. Nah - Sarko believes in the free market

  3. With Carla Bruni as President!

  4. Is that French for "Northern Rock"

  1. Add to that, £1.5 billion in sub-prime losses and it is clearly a bad time to be a french b(w)anker.

    FT article: http://www.ft.com/cms/s/0/bd9f55d6-ca4b-11dc-a960-000077b07658.html

    BBC News: http://news.bbc.co.uk/1/hi/business/7206270.stm

    At least the boss offered to resign, so he clearly isn't cut out for a 2nd career in politics :evil:
  2. Astounding. SG probably aren't telling the whole truth in their statements. Technically, such a large fraud couldn't happen without someone at the top giving it the nod. Don't be suprised to see the French govt nationalise the bank.
  3. Any chance you could post that article, Blogg? Subscription only article.
  4. Hmmmmmmmmmm... Knowledge is one thing, system permissions are another. I wonder, given his transfer from middle to front office, whether someone 'forgot' to amend his profiles on the systems used. Leeson managed to do what he did because he was middle office and could set up hidden accounts - additionally the derivs world was almost anarchy back then, with 'control' nothing more than a joke. In today's 'KYC' and massively internally audited financial world, departmental segregation is almost a religion. I'd love to know exactly what he did!
  5. Came across this quote on Sky News: "vanilla futures hedging" on European equity markets.

    Any of the somewhat better informed ARRSEers care to explain WTF that quote means ? In English, preferably in Squaddie terms :D

    Disclaimer: Yes I am a financial fuckwit when it comes to "Bankenese" :wink:
  6. :D

    Vanilla = 'Ordinary' as opposed to 'exotic'. E.g. An egg banjo as opposed to an egg fried in the oil of the most virgin olive, laid on focaccia bread warmed to precisely 32 degrees C with a balsamic vinegar dressing and basil leaf garnish.

    Futures = A contract to buy / sell a product at a future date at a set price. E.g. Agreeing with your mate that you'll buy his bike next month for £X when you're flush again so he knows he’ll be getting £X and can put a deposit on a new bike on his credit card knowing that he’ll get the cash in to pay it off.

    Hedging = A trading strategy to mitigate risk. E.g. if you enter into a futures contract to sell shares at a set price on a set date, taking a punt that the price will rise, you will "hedge your bet" by buying a call option on buying those shares at a set price at a future date in case the market falls (and vice versa). E.g. You’re out on the lash, but before you get too legless (and in the hope you don’t) you set up a “See you later at the club” with an ‘essence’ chick. As you get steadily more minging, and with the prospect of said chick blowing you out, you hedge by getting friendly with a less essence but possibly less fussy chick so you stand some chance of getting laid that night.

    Hope that's KISS enough for you! :D

    Edited to add squaddie analogies.
  7. Plain vanilla futures are the most basic type of futures vehicle. Futures hedging is where, for instance, a trader has a particular investment and will sign an agreement to sell the investment at an agreed time in the future, and at an agreed price, to an agreed buyer. Thus, the hope is that losses can be hedged against in relation to future price drops. However, there's always the possibility that the market value of the investment could be higher than the agreed selling price, thus money can be lost.
  8. Sooo...

    Since one of the factors considered in working out the "value" of a share is the futures price have to wonder if the sudden closing out of the HUGE long futures positions at the same time as the markets were heading South simply compounded the misery!
  9. Beat me to it, not so DozyBint.
  10. According to the Chairman of SocGen, they were expectng to be bullish with their financial reports this week...check his letter out 8O

    I love it when a plan doesn't come together for the French. :D

    "The Chairman

    Dear Sir, Dear Madam,

    At the start of the week, Société Générale was getting ready to announce pre-tax income in excess of 5.5 billion euros for 2007 despite the significant cost of the financial market crisis, thereby proving the Group's capacity to absorb the very serious crisis. It was against this backdrop of extreme volatility that you are aware of that a fraud of an unprecedented size was uncovered last weekend, committed by a trader in our equity division. Our priority was to cut off the colossal position that he had created, and concealed, as quickly as practicable.

    We informed the Bank of France, the AMF, our statutory auditors and the Audit Committee of Société Générale as soon as we became aware of the fraud. The position had to be unwound in very difficult market conditions this week. The result was a sizeable loss.

    The trader responsible for the fraud was immediately suspended. He will leave the Group, along with the individuals in charge of his supervision.

    The combined impact of the financial crisis and the exceptional fraud will, nevertheless, enable the Group to generate net income of 700 million euros for the full year.

    Between Sunday January 20th and Wednesday January 23rd, a recapitalisation operation of 5.5 billion euros was put in place. In three days, two large international banks, J.P. MORGAN and MORGAN STANLEY agreed to guarantee the operation, which reflects Société Générale's strength. This recapitalisation will keep shareholders' equity at the same levels as the world's best banks. It will help us continue our development in keeping with the excellent performance of previous years.

    I am very sorry to have to announce this extremely bad news to you. I am fully aware of the impact that it may have on our company's image and on yourselves and I present my sincere regrets, on behalf of all the members of the COMEX.

    We will triumph over this twofold crisis, the like of which has never been seen before, using the qualities which we have established in recent years and all of your individual talents, which are greatly appreciated. As a result, I remain confident in Société Générale's prospects and in its capacity to generate profitable growth which I am sure you share with me.

    The Board renewed its confidence in me and asked me to continue my mandate. You can count on me, as I know I can count on you, to get through this difficult period.

    Daniel Bouton"
  11. 8O Indeed! Ouch!
  12. Carla, Carla, Carla

  13. Yes, it's almost (but not quite) enough to make you wish you were President of France!