Rogue French bank trader dealt in tens of billions of euros

The rogue futures trader who cost French bank Socit Gnrale4.9 billion euros ($7.4 billion) had been betting on a scale of tens of billions of euros, the bank said Friday.

France's No. 2 bank apologized to shareholders after announcing what appears to be the biggest trading fraud ever carried out by a single person.

The news Thursday rattled an already jittery banking sector at a time of global market uncertainty.

The scale of the alleged fraud grew clearer Friday, when a bank official said 31-year-old 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 ($53.9 billion). The official spoke on condition of anonymity.

In a baffling twist, the bank said Kerviel appears to have netted no personal gain.

The bank's CEO took out full-page newspaper advertisements Friday begging shareholders to accept his "apologies and deep regrets."

"I understand your disappointment, your anger," Daniel Bouton wrote. "This situation is perfectly unacceptable."

Socit Gnrale shares, which have lost nearly half their value over the past six months, were suspended on the Paris bourse Thursday morning. When trading resumed, the stock fell about four per cent amid analyst downgrades.

Undetected by the bank's multilayered security systems, Kerviel had for over a year been fraudulently using the company's funds to bet on European stock markets, Socit Gnrale said.

The bank said it learned of the fraud last weekend. With markets in turmoil, Socit Gnrale was forced to sell the contracts built up by the rogue trader just as stocks were plunging. It took three days to unload them.

French President Nicolas Sarkozy said during a visit to India that the bank's problem "is an internal fraud that had consequences on Socit Gnrale's results but has not affected the solidity and reliability of the French financial system."

Market sell-off heightened loss

With questions swirling over how a 4.9-billion-euro loss could have been the work of a single man, the governor of the Bank of France insisted Friday the sum had "nothing to do with the subprime crisis, with the difficulties of the financial market in general."

However, Christian Noyer said, "If there hadn't been a collapse in the markets early in the week, the size of the loss would have been much smaller."

Socit Gnrale filed a legal complaint Thursday accusing the trader of fraudulent falsification of banking records, misuse of such records and computer fraud.

Elisabeth Meyer, Kerviel's lawyer, said he is "available for judicial authorities," without specifying where he is.

Many questions remain as to how and why Kerviel perpetrated what the bank described as fraud "exceptional in its size and nature."

It remains unclear whether he was acting out of malevolence, ambition or some other reason. Union officials representing Socit Gnrale employees said managers told them Kerviel had "family problems."

Employed by Socit Gnrale since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the more glamorous futures desk, where he invested the bank's money by hedging on European equity market indexes, placing bets on how the markets would perform.

Kerviel shocked and impressed executives with the complexity and scale of his trades. Using his knowledge of Socit Gnrale's control systems, gleaned in his former monitoring role, he escaped detection. Most of his positions went unnoticed by colleagues and superiors as Kerviel covered his tracks.

The bank said it expects to report a net profit of 600 million to 800 million euros for 2007, even after the fraud and another 2.05 billion euros lost in the subprime mortgage crisis.

Founded in 1864, Socit Gnrale is active in 77 countries and employs 120,000 people.