Trading fraud shreds 2007 profit of SocGen

Societe Generale last night said that it lost €4.9 billion through unauthorised trading in European stock market index futures.

A Paris-based trader had concealed his positions through "a scheme of elaborate fictitious transactions" the bank said. The bank said the employee did not benefit from the fraud and his motivations were unclear. The trader assisted the bank in clarifying the nature and extent of the fraud over recent days.

SocGen raised  €5.5 billion in capital underwritten by JP Morgan and Morgan Stanley.

SocGen said that the trader breached trading limits and had managed to conceal his losses because of his knowledge of the bank's control systems having worked in back office areas processing trades before moving to work on the trading desk of the bank in Paris.
 
SocGen also announced further write-downs of €2.05 billion related to the global credit crunch.

The bank said that its net profit would drop to €600-800 million from €5.22 billion a year earlier because of the fraud and other losses in US sub-prime mortgages and monoline insurers.