Risk register · entry
Q-F · FraudSociété Générale / Jérôme Kerviel rogue trading loss
Forged hedges made a 50 billion euro bet look flat. The 4.9 billion loss was real.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this quadrant
The exposure was real and the book was not. Kerviel ran about 50 billion euros of directional positions while entering fictitious offsetting trades, deleting and re-entering hundreds of them and forging emails, so the bank's own risk picture showed a desk operating inside a 125 million euro limit. The number that should have prompted a question was his own: a declared 2007 profit of 55 million euros while 1.4 billion of gains sat concealed. The 4.9 billion euro loss is real, but it crystallised on the forced unwind rather than on the fraud.
The record
- Société Générale announced a final loss of €4.9 billion on 24 January 2008; the Cour de cassation definitively confirmed that figure in its decision of 19 March 2014.certain
- The €4.9 billion is the net of a €1.4 billion concealed profit carried into 2008 from unauthorised 2007 positions, less a €6.3 billion loss on unwinding the positions set up in the first weeks of January 2008.certain
- On 19 and 20 January 2008 Société Générale discovered concealed positions totalling some €50 billion, more than the bank's entire capital; the positions were unwound over three days from Monday 21 January 2008.certain
- Kerviel's Delta One desk, which had eight traders, operated under a global end-of-day exposure limit of €125 million; his unauthorised positions had reached €30 billion during 2007.certain
- Kerviel's declared 2007 profit was €55 million against a fixed salary of €48,500 and a requested bonus of €600,000, while the €1.4 billion of actual concealed gains remained invisible to his managers.certain
Sources
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