Rogue trader to cost French Bank $7bn

Discussion in 'Current Events' started by edesignuk, Jan 24, 2008.

  1. edesignuk Moderator emeritus

    edesignuk

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    #1
    Ouch.
     
  2. scotthayes macrumors 68000

    scotthayes

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  3. Music_Producer macrumors 68000

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    #3
    I think I'm pretty sure that this guy put a ton of money on carry trades (like USD/JPY or GBP/JPY) .. to earn the interest differential.. and the fact that carry trades were sky-rocketing. As the market started crashing.. he probably tried to reduce his losses by buying even more at lower levels. Never thought that the markets would crash the way that they have right now..

    Sucks for the bank. About time these banks implemented stronger security. I don't know how they fail to notice billions in losses.
     
  4. Caezar macrumors 6502

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    #4
    The guy lost the money on equity derivatives.
     
  5. ~Shard~ macrumors P6

    ~Shard~

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    #5
    Impressive - who would have thought that one man could one-up all of Amaranth? :D

    What ever happened to Nick Leeson anyway? ;) I sure remember what happened to Barings... :eek:
     
  6. ucfgrad93 macrumors P6

    ucfgrad93

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    #6
    How in the world could the bank not know? I heard on TV this morning that he and his immediate supervisors have been fired. Hope the guy gets prosecuted.
     
  7. ~Shard~ macrumors P6

    ~Shard~

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    #7
    Yeah, makes you wonder. I guess that's why he was a "rogue trader". ;) Seriously though, even then, how does someone not notice this? :confused:
     
  8. edesignuk thread starter Moderator emeritus

    edesignuk

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    #8
    There's now speculation that his actions helped accelerate the rapid decline in global markets seen earlier in the week as he panicked and tried to recover his losses (gambling up to £60bn!!!).

    Way to go, frenchy :D :p
     
  9. Music_Producer macrumors 68000

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    #9
    Turns out the losses are much greater - in tens of billions. I think this bank might go bust.
     
  10. j26 macrumors 65832

    j26

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    #10
    He lives in Galway in Ireland and lectures in risk management :eek:
     
  11. John Jacob macrumors 6502a

    John Jacob

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    #11
    Oh, I hope not! Societe Generale is one of the big four or five French banks. If they go bust... That would be a lot worse than Northern Rock going bust. :eek:
     
  12. edesignuk thread starter Moderator emeritus

    edesignuk

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    #12
    Where did you get this info from?
     
  13. Music_Producer macrumors 68000

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    #13
    I'm a currency trader so I have various news platforms open within my trading platform - right now I saw it on Reuters.

    "The scale of the alleged fraud grew clearer Friday, when a bank official said 31-year-old trader Jerome Kerviel's positions had reached "several tens of billions of euros" -- a staggering sum for a bank whose market capitalization is 35.9 billion euros ($52.6 billion). The official spoke on condition of anonymity in line with bank policy on such matters"
     
  14. Queso macrumors G4

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    #14
    I like the take on it from The Daily Mash :D

     
  15. Music_Producer macrumors 68000

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    #15
    Then look for the global equity markets to resume their crashing.. in fact, carry trades just dropped 100 points right now. Wow, I mean.. I know when my wife steals a $20 bill from me (lol) I don't know how these bank managers can let such trades go unnoticed.. it's just .. wow!
     
  16. juanm macrumors 65816

    juanm

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    #16
    It's said now (and it seems the most probable hypothesis) that it was indeed the bank who lost this money, and attempted to cover it accusating this trader. The French autorities have started investigating the case.
    There's no way an anonymous young trader could gamble such a huge chunk of the Bank capitalization without nobody noticing!

    Le Monde
     
  17. Sauron's Master macrumors regular

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    #17
    Since when do positions equal losses?

    To clarify , the positions that Jerome held were indeed in the tens of billions of euros but the actual cost to close out his futures positions was the amount of the reported losses. What I'm guessing happened is it the cost of those futures contracts he was trading was potentially in the "tens of billions of euros" but the actual difference between the cost of those contracts to SG and the market value of those contracts was the cost to close them out, which was obviously lower. Vanilla futures are generally liquid and done with the clearinghouse as a counterparty so there it's unlikely that SG had to that huge of losses to close the positions although the French markets might handle equity futures differently.

    Here's a Forbes article that also contains the quote: http://www.forbes.com/feeds/ap/2008/01/25/ap4574270.html

    Note how it states the original figure for the losses while adding info about the position size, clearly implying they are not one and the same in this case.
     
  18. theBB macrumors 68020

    theBB

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    #18
    Besides, comparing market cap and positions of a bank does not make a whole lot of sense to me, either. Don't banks have a lot more assets under management than their market caps?
     
  19. Sauron's Master macrumors regular

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    #19
    http://finance.google.com/finance?fstype=bi&q=OTC:SCGLY

    Nearly all corporations have more assets than they are worth in market capitalization, mostly because they have so much in liabilities as well.

    SG, according to Google Finance, in 2007 has over a trillion euros in assets and slightly less in liabilities mid-year. While it's still ridiculous that anyone has the ability to make trades in the tens of billions of euros, these figures provide a better picture than someone comparing it to SG's market capitalization.
     
  20. Pani macrumors member

    Pani

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    #20
    I find it interested that this has been featured in U.S. MSM. Yet, the fact that former Countrywide CEO Anglelo Mozilo walked away with approx 1/2 billion including a $115 million exit package, Stan O'Neal, former Merril Lynch CEO walked away with a 161. million severance package, and Prince of Citigroup 42 million dollars has gotten far less coverage. I don't know if they did anything technically illegal, but considering the crisis they helped to create, those amounts are certainly obscene.

    http://www.alternet.org/story/73733/
    (Where first 2 figures came from)
     

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