France’s SocGen hit by Euro4.9bn fraud

French bank Société Générale has uncovered a massive Euro4.9bn fraud relating to the activities of a single rogue futures trader.

As a result of this fraud the group will launch a capital increase of Euro5.5bn over the next few weeks.

France’s second largest bank also said it would post additional write-downs of Euro2.05bn in Q4, Euro1.1bn of which related to US residential mortgage risk.

The fraudster, who was responsible for ‘plain vanilla’ hedges on European equity market indexes, had taken massive fraudulent directional positions based on his knowledge of the banks inner workings.

“He managed to conceal these positions through a scheme of elaborate fictitious transactions.

‘He managed to conceal these positions through a scheme of elaborate fictitious transactions,’ said the bank in a release.

The employee who has admitted to the fraud has been suspended and a dismissal procedure has been initiated.

Daniel Butler, executive director of Aon’s financial institutions team said it was not only the magnitude of the fraud that made it so shocking, but the fact that it happened at head office ‘under the noses of senior management.’

Julian Spence, senior vice president of Transatlantic Re London, called the incident ‘an extra shock in an already highly stressed environment.’