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Do banks never learn anything?
Jan. 24th, 2008 07:48 amWell, let's hear it this mormning for Société Générale, which has managed to allow a single trader to spunk away nearly €5bn.
And if that isn't enough to make you choke on your cornflakes, it gets better. The trader only had "limited authority" and he managed to lose this in plain vanilla futures hedging on European equity market indices.
How?
Well, SocGen employed as a trader someone who had previously worked in the middle office. In other words, he knew how he could hide the mess while he presumably increased his stakes in a hope that he would get out of trouble. The trader created fictitious deals to make it look as if things were fine. And it looks as though he got away with it for quite a while (well, it takes quite a few bum trades to get up to a €5bn loss).
It goes to show one thing. Anyone earning (relative) peanuts in a back-office support job who thinks that he could make bundles as a trader "because it doesn't look that hard" should take note. It isn't as easy as you might think.
SocGen discovered the loss on January 19th and 20th. After that, the additional writedown of just over €2bn because of the subprime crisis seems fairly mild.
Capital raising necessary. Not really the best time to be going about it.
It made my morning, it really did.
And if that isn't enough to make you choke on your cornflakes, it gets better. The trader only had "limited authority" and he managed to lose this in plain vanilla futures hedging on European equity market indices.
How?
Well, SocGen employed as a trader someone who had previously worked in the middle office. In other words, he knew how he could hide the mess while he presumably increased his stakes in a hope that he would get out of trouble. The trader created fictitious deals to make it look as if things were fine. And it looks as though he got away with it for quite a while (well, it takes quite a few bum trades to get up to a €5bn loss).
It goes to show one thing. Anyone earning (relative) peanuts in a back-office support job who thinks that he could make bundles as a trader "because it doesn't look that hard" should take note. It isn't as easy as you might think.
SocGen discovered the loss on January 19th and 20th. After that, the additional writedown of just over €2bn because of the subprime crisis seems fairly mild.
Capital raising necessary. Not really the best time to be going about it.
It made my morning, it really did.
