Rules not adhered to at Societe Generale: French FM

PARIS: French finance minister Christine Lagarde said on Monday that some internal controls at Societe Generale failed or were not heeded before the banking giant announced massive losses attributed to a rogue trader.

Lagarde, who submitted a report on the case to the French prime minister Monday, said the bank followed market rules in unwinding the trader’s transactions. But she also urged greater controls on banks in France and worldwide. In a bombshell announcement on January 24, Societe Generale said that it had lost e4.82 billion ($7 billion) in cleaning up unauthorised transactions by trader Jerome Kerviel. The bank says Kerviel overstepped his authority and bet e50 billion ($73 billion) — more than the bank’s market value — on futures in European equity markets. Kerviel told investigators that his superiors had turned a blind eye to his activity, a claim the bank’s lawyer called false.

Lagarde’s report did not assign blame but highlighted lessons to be learned from the scandal, which has deeply shaken France’s banking sector and prompted speculation that Societe Generale could be bought out or broken up.

“Very clearly, certain mechanisms of internal controls of Societe Generale did not function, and those that functioned were not always followed by appropriate modifications,” Lagarde told reporters after submitting her report. She said Societe Generale’s management of the transactions was “in conformity with the existing regulations”.