CEBS analyses op risk impact of Société Générale fraud

CEBS has released research into op risk consequences of Jérôme Kerviel’s rogue trading

LONDON – The Committee of European Banking Supervisors (CEBS) has published a results summary of its stock-take of banks’ and supervisors’ reactions to the $7 billion rogue-trading scandal at French bank Société Générale in January.

The stock-take was taken with supervisors within the European Economic Area (EEA) and looked at how Jérôme Kerviel’s fraud has influenced advanced measurement approach (AMA) implementation for Basel II, operational risk practices, governance and internal controls.

Banks emphasised the importance of personnel risk and that the fraud represented a broad failure of internal controls. Other recommendations include incentivisation appraisals, increased senior management understanding of complex trading, fraud controls, and a risk management focus on areas of business that have extreme profit-and-loss capability.