Société Générale, along with the
industry as a whole, must shoulder the responsibility for the
£3.7bn losses incurred by Jerome Kerviel in February,
said participants at FOWs 18th annual Derivatives Week
The French bank came in for a stinging criticism from a
collected panel who were unforgiving with their remarks.
I think it is fair to say that SocGen had a lack of
adequate systems in place, said Chris Brennan, an
associate at law firm Barlow, Lyde & Gilbert. Brennan added
that the bank should not have allowed Eurexs 90 alerts go
unnoticed. Eurex asked SocGen about unusual activity and
90 different alerts were missed by the bank. Why did no one at
the bank ask about such a huge margin that must have built up?
How can a company allow this to go unnoticed? Brennan
Steven Stewart, managing director, sales, Europe at Trading
Technologies said that the derivatives industry as a whole
lacks an adequate upper management.
While there is more room for manipulation and error given
the large volume increase across the industry managers should
understand their traders positions more, Stewart
Brennan was more frank in his assessment of the industry.
There is common complacency of risk controls and it is
becoming a real problem among many firms. People are critical
when things go wrong but there is often a lack of robust
individuals that understand what is actually going on. There
needs to be more management overseeing the day-to-day running
of the operations, he said.
Original rogue trader, Nick Leeson said later during the
conference that there was a staggering lack of understanding
over the trades he was conducting in 1995 when Barings bank
suffered losses of £827m due to his now infamous five
eights account. Brennans comments tend to convey the
picture that things have failed to move on adequately.
CME Groups head of clearing, Kim Taylor, said that there
needed to be more encouragement and investment in high skilled
middle office staffing and more sophisticated technology if
these violations were to be stopped.
It was also a common agreement among the panellists that back
and middle office employees were not as adequately paid and
that they should receive bonus rewards in line with the
executing traders that manage their risk and make large
Protecting companies against large losses is as important
as making huge gains, said Stewart.