UPDATE: French Banking Commission Fines SocGen EUR4 Million
Friday July 4th, 2008 / 19h39
(Adds detail, background.) By Mimosa Spencer and Alice Dore Of DOW JONES NEWSWIRES PARIS -(Dow Jones)- The French Banking Commission Friday said it fined Societe Generale (13080.FR) EUR4 million for failures in its internal procedures relating to the EUR4.9 billion loss linked to an alleged rogue trader fraud. In a statement Friday, the banking commission said serious failures took place at the French bank in the follow-up and control at the first level of hierarchy of the trader allegedly responsible for trading losses. Societe Generale declined to comment. Societe Generale announced trade losses in January, after unwinding unauthorized trades it alleges were carried out by then-employee Jerome Kerviel. The banking commission said the origins of gains made by the trader weren't sufficiently examined. It added the trader's managers didn't ensure the trader followed internal procedures when it came to taking vacation, which is an important part of market oversight. The bank in May released an internal report criticising Kerviel's direct manager and his superiors, saying they didn't react appropriately to several alert signals. Auditing firm PriceWaterhouseCoopers, in a separate report in May, said internal control systems were weakened by a lack of seniority, mismatched resource allocation to support and control functions, and a heavy reliance on manual processing. The bank's market oversight controls were insufficient, the banking commission added. The 'Delta One' trading desk where Kerviel worked was ill-adapted for operational risk management because there were no limits on overall trading positions and intra-day positions, the banking commission said. The banking commission said its sanction took into account the bank's rapid response once the fraud was detected as well as its efforts to fix weaknesses in its systems. The banking commission's maximum sanctions for large banking institutions is EUR5 million. Societe Generale shares Friday closed EUR1.14 lower, or down 2.5%, at EUR54.81, in an overall lower Paris market. Company Web site: www.socgen.com -By Alice Dore and Mimosa Spencer, Dow Jones Newswires; +33 1 40 17 17 40; mimosa.spencer@dowjones.com (Nathalie Boschat contributed to this item.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=N3pJNd1FyFKKQZIFIr7Pgg%3D%3D. You can use this link on the day this article is published and the following day.
