PARIS - The rogue futures trader who allegedly cost French bank Societe Generale $7.14 billion had been betting on an even larger scale - with tens of billions in fraudulent deals, the bank said yesterday.
France's second-largest bank apologized to shareholders after discovering what appears to be the largest trading fraud in history to be carried out by a single person. The news Thursday rattled an already jittery banking sector at a time of global economic uncertainty.
The bank said yesterday that trader Jerome Kerviel's trading positions had reached "several tens of billions of euros" - a staggering sum for a bank with a market capitalization of 35.9 billion euros ($52.6 billion).
French presidential aide Raymond Soubie said the trader had been dealing with more than 50 billion euros ($73.31 billion) - or more than annual gross domestic product for entire nations such as Morocco, Bangledesh, Vietnam and Slovakia.
The bank said Kerviel, 31, appears to have netted no personal financial gain from the alleged schemes.
Paris prosecutors were conducting a preliminary probe that combines two legal complaints, judicial officials said: one by Societe Generale accusing the trader of fraud, another by small shareholders in the bank seeking to know how the fraud occurred.
Undetected by the bank's multilayered security systems, Kerviel had for more than a year been fraudulently using the company's funds to bet on European stock markets, Societe Generale said.
The bank said it learned of the fraud last weekend. With money markets in turmoil, Societe Generale 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 he would announce proposals next week in London with other European leaders on how to boost transparency in the financial sector and encourage the "moral improvement of financial capitalism."
With questions swirling over how an individual could rack up $7.14 billion in losses for a company, the Bank of France governor insisted yesterday the scam had "nothing to do with the subprime crisis, with the difficulties of the financial market in general."