Bank reveals how rogue trader evaded controls

SOCIETE GENERALE detailed yesterday how a young trader evaded all its controls to bet some €50 billion — more than the French bank’s market worth — saying he hacked computers and used other “fraudulent methods” to cover his tracks, causing billions of dollars in losses.

The bank says the trader, Jerome Kerviel, did not appear to have profited personally from the transactions and seemingly worked alone — a version of events reiterated yesterday by Jean-Pierre Mustier, chief executive of the bank’s corporate and investment banking arm.

But, in a conference call with reporters, Mr Mustier added: “I cannot guarantee to you 100% that there was no complicity.”

Jean-Michel Aldebert, the head of the financial section of the Paris prosecutor’s office, said the questioning of Mr Kerviel was “going very well and the investigation led by the specialists of the financial police is extremely fruitful”.

Mr Kerviel, who was taken in for questioning on Saturday, can be kept in custody until this afternoon.

Societe Generale said Mr Kerviel misappropriated other people’s computer access codes, falsified documents and employed other methods to cover his tracks — helped by his previous experience working in offices that monitor traders.

In a five-page document released yesterday, France’s second-largest bank also sought to counter the notion that it had disrupted markets by hurriedly selling off the massive positions that Mr Kerviel allegedly built up without authorisation.

The bank took three days last week to sell off the contracts on the Eurostoxx, DAX and FTSE indices, but said on Sunday it had done so in a “controlled” way.

“He had a very good understanding of all of Societe Generale’s processing and control procedures,” the statement said.

The bank said Mr Kerviel had built up a position worth some €50bn — which was eventually closed or hedged by last Wednesday with a loss of €5.9bn.

“The position was unwound over three days in a controlled fashion,” it said.

Mr Aldebert told reporters on Saturday that Mr Kerviel gave himself up of his own free will.

The trader had not been seen in public since the bank announced his unauthorised trades in a statement on Thursday.

His motives remained a mystery, and the bank said it appeared that he did not gain personally from the trades.

Acquaintances described Mr Kerviel as reserved and considerate, a young man who once taught children judo and held the door for elderly neighbours.

Mr Kerviel had been investing the bank’s money by hedging on European equity market indices, meaning he bet on how the markets would perform at a future date.

Germany’s Der Spiegel newsmagazine cited unnamed traders as saying Mr Kerviel made a huge gamble on Germany’s DAX stock exchange, buying some 140,000 DAX futures. When the exchange dropped, Mr Kerviel racked up losses that amounted by mid-January to about €2bn, said the report, posted on German weekly Der Spiegel’s website.

Societe Generale said it discovered the fraud last weekend and unwound the trader’s losing bets starting on Monday, when world markets tumbled.