French finance minister blames operational risk for the SocGen fraud
PARIS - The fallout from the rogue-trader scandal at Société Générale continues. Takeover rumours about the institution abound, while the firm is working to finalise a plan to raise more than €5.5 billion in additional capital.
In the meantime, French finance minister Christine Lagarde said earlier in the week: "There is a risk that is operational risk, as opposed to market risk, which must be taken more seriously into consideration." Lagarde made the comment to reporters after handing in a report on the Société Générale affair to prime minister François Fillon.
"Certain internal control mechanisms at Société Générale did not work and those that did were not always followed up with the appropriate changes," said Lagarde. The 11-page report, drawn up with the co-operation of the country’s banking commission and its financial markets authority, identifies several points that "might have been decisive" in the run-up to the scandal, according to various press reports.
The report says banks should devote special attention to tackling internal fraud and that senior managers should be "fully involved" in the effort.
Adding fuel to the fire, recent polls in France have shown that more than 50% of the public blame Société Générale’s senior management for the losses, while less than 15% blame the trader at the centre of the controversy, Jérôme Kerviel.
Lastly, one of the firm’s former internal auditors has given press interviews damning the lack of seniority and experience of its auditing and inspection team. A spokeswoman for SocGen said the former employee’s comments were “defamatory” and that “his motives are of a personal nature”.
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