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SG gives details of fraud, but questions remain
Société Générale has released more details of the rogue equity index trades that cost it €4.9 billion, alongside news that the bank was first alerted to the trades as far back as November 2007.
But, the bank acknowledged, the instruments in his first (real) portfolio had required margin payments, which the bank had made without becoming suspicious. When the bank finally uncovered the fraud, it had a nominal value of €50 billion - but the margin payments involved could have been as high as €5 billion.
One London equity derivatives trader commented: "I can't see how [the margin requirements] wouldn't have shown up. It definitely wouldn't have looked like part of his legitimate job - his risk limits would have been of the order of tens or hundreds of millions."
"It doesn't hang together," another commented. "The initial margin must have been very big - billions of euros. For this to get through without being noticed, at a sophisticated bank like SG, just doesn't compute." That the margins were paid without raising the alarm points to a major failure in the bank's back office, one exchange insider added.
The rogue trades might have been in progress since last year - reportedly the Eurex exchange alerted SG to a potential problem in November 2007, but the trader remained undiscovered. The unauthorised trades reportedly started as early as 2005.
See also: "He didn't want to tell the truth immediately"
Questions remain over SG rogue trader
€4.9 billion fraud at Société Générale
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