Question

One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank Societe Generale. The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six months. The trader apparently escaped detection by using knowledge of the bank's internal control systems learned from a previous back-office monitoring job. Much of this monitoring involved the use of software to monitor trades. In addition, traders were usually kept to tight trading limits. Apparently, these controls failed in this case What general weaknesses in Societe Generale's internal controls contributed to the occurrence and size of the losses? You will need to complete your DB statement in order to see other's responses.

Answer 1

A French bank announced Thursday that it had lost $7.2 billion, not because of complex subprime loans, but the old-fashioned way — because a 31-year-old rogue trader made bad bets on stocks and then, in trying to cover up those losses, dug himself deeper into a hole.

A "thorough analysis" of all positions in his departmrnt has been undertaken, which has confirmed the "isolated and exceptional nature of this fraud".

The internal control og general weakness in Societe Generale's contributed to the occurence and size of the losses.

Socgen said chairman and chief exeutive Daniel Bouton had offered his resignation but this was rejected. The board reaffirmed its confidence in him and in the top management and said it has asked Bouton to "lead the group back on track for profitable growth".

"It's lot of money - he said"Normally you have a compliance mechanism which involves trade like these being rum by moe than one person to avoid a situation where it is "Only one pair of eyes".

A "thorough analysis" of all pos.itions in his department has been undertaken, which has confirmed the "isolated and exceptional nature of this fraud".

The banking industry used to have a reputation for honesty, trust and prudence. This latest scandal, on top of the massive losses in credit markets, and the ongoing incidence of mis-selling to retail customers, indicates that there is a systemic deficit in ethical values within the banking industry."