There has been a growing concern and skepticism from all quarters, viz, political leaders, the shareholders and customers in France on the explanation of Socite Generale the French banking giant that whether a single trader was alone responsible for creating such a whopping loss of U.S.$7.14 BILLION which is one of the largest financial scams in the history of financial markets. The doubt grew stronger on the unexplained reason as to why the Bank took nearly a week to make public the losses after discovering the fraud.
The biggest fraud was said to have been committed by Jerome Kerviel a 31 year old futures trader by making big bets on European equity markets, using more money than he was authorized to wager. He had hidden the losses by tweaking the data in the banks computer system. This he did by using the knowledge gained when he worked in the security control department. His knowledge helped him to know when security checks were coming and escaped detections by creating fictitious transactions. The trader is reported to have bet earlier this month otn the hope that the European Markets would rise, but, contrary to his expectation , it fell. When the losses reached a level that he could no longer conceal, it came to the knowledge of the Bank last Saturday(19th Jan ,008). The Bank had no other alternative except to cover the position on the following Monday (21st Jan 008) which coincided with one of the worst days in world markets since Sept 11th and hence resulted in the whooping loss.
Coming back to the story, French Prime minister, Francoise Fillon had reacted in a press conference in Luxumberg by saying that it is difficult for anyone to understand how a single person in a relatively short time can cause such a huge loss. He has ordered an investigation which would be held by his Finance Minister who would report back to him within eight days with the findings of the investigation.
Mr.Frederik-Karel, an Attorney representing more than 100 shareholders has filed a suite against bank accusing it of fraud and breach of trust. According to him it could not have been done by s single trader, it is impossible for him do it alone and just blaming a young trader would neither solve the mystery nor the Bank can wash off its hands by doing so.
The editorial comments of French Newspapers especially the financial ones were equally critical. The substance of it was as to how could a bank of such caliber can fall into such a financial mess up and why did it take such a long time for it to respond.
Thus if the Bank were to salvage its reputation and restore the trust in the financial market, both the questions have to be answered by it which which should also bring out the involvement of other persons or agencies in creating such a big loss resulting in a blow to the entire financial markets of the world.