{"id":18322,"date":"2013-01-05T18:48:45","date_gmt":"2013-01-05T16:48:45","guid":{"rendered":"http:\/\/localhost\/wordpress\/?p=18322"},"modified":"2013-01-05T18:48:45","modified_gmt":"2013-01-05T16:48:45","slug":"this-is-the-main-reason-why-the-world-markets-went-down","status":"publish","type":"post","link":"https:\/\/www.satfrequencies.com\/invest\/this-is-the-main-reason-why-the-world-markets-went-down\/","title":{"rendered":"This is the main reason why the world markets went down"},"content":{"rendered":"
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This is the main reason why the world markets went down last Monday<\/p>\n

The rogue trader who cost SocGen \u20ac5bn <\/font>
\nBy FT Reporters<\/p>\n

Published: January 24 2008 07:19 | Last updated: January 25 2008 02:24<\/p>\n

A lone rogue trader was on Thursday night being blamed for the biggest fraud in investment banking history after Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, one of the pillars of French finance, revealed his actions had cost it \u20ac4.9bn (\u00a33.6bn) and forced it into an emergency \u20ac5.5bn cash call on shareholders.<\/p>\n

J\u00e9r\u00f4me Kerviel, a 31-year-old Paris-based trader working on the bank\u2019s European equities derivatives desk, was already being portrayed by the governor of the Banque de France on Thursday as a \u201cgenius of fraud\u201d.<\/p>\n

\nThe whereabouts of Mr Kerviel, who had been interrogated by SocGen chiefs over the weekend, were unknown, although his lawyer on Thursday night dismissed rumours he had fled and told the French press he was available if needed by the authorities. <\/p>\n

Mr Kerviel risked billions of euros on equity derivatives \u2013 in effect betting on future movements in European stock markets \u2013 and created elaborate fictitious hedging positions to cover his tracks in a covert scheme. <\/p>\n

SocGen, the world\u2019s leading equity derivative trading house \u2013 it claims to have invented the instruments \u2013 quickly unwound the positions he had amassed, estimated at \u20ac40bn-\u20ac50bn. SocGen\u2019s fire sale contributed to the heavy stock market falls on Monday that provoked the US Federal Reserve\u2019s dramatic interest rate cut the following day. The Fed was informed of the SocGen problem on Wednesday by the Banque de France. <\/p>\n

SocGen denied that its operations had caused the market fall because it kept them to about 10 per cent of trading volumes. Analysts pointed out that markets began to fall before the sell-off. <\/p>\n

The fraud also overshadowed SocGen\u2019s announcement on Thursday of a \u20ac2bn hit from the US mortgage crisis, in addition to the \u20ac375m of writedowns taken in the third quarter. SocGen shares fell 4.14 per cent, ending down \u20ac3.27 at \u20ac75.81. Both Daniel Bouton, executive chairman, and Jean-Pierre Mustier, head of the investment bank, tendered their resignations but had their offers rejected by the board. Nonetheless their future with the bank is in doubt. Although it discovered the problem at the weekend, SocGen waited until it could unwind the trades before revealing it. <\/p>\n

The scandal \u2013 incorporating a fraud significantly bigger than the $1.4bn deception that brought down Barings Bank in 1995 \u2013 has shocked the French establishment, which moved quickly to avert a crisis of confidence.<\/p>\n

Christian Noyer, governor of the Banque de France, said: \u201cI am not worried about confidence. The proof is that Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, even with such an unprecedented fraud \u2013 that was conducted with a sophistication also without precedence \u2013 can be repaired in three days and emerge stronger than before [due to the capital increase].\u201d <\/p>\n

Mr Kerviel appears to have built up his losses over a short period using accounts and passwords belonging to colleagues. SocGen was first alerted to the fraud late last Friday, following a tip from another trader. At the time, Mr Kerviel had built up losses of about \u20ac1.5bn, which spiralled as the positions were unwound in a falling market.<\/p>\n

Mr Mustier said he believed Mr Kerviel acted alone and did not profit personally, although his motive was unknown. The trader and up to six people above him have been sacked. SocGen is understood to have filed a complaint with police. <\/p>\n

SocGen will raise \u20ac5.5bn through an emergency rights issue, underwritten by JPMorgan and Morgan Stanley, that will leave its Tier One capital ratio higher than before at 8 per cent. The price of the issue will be formally set after SocGen reports its results for 2007 next month.<\/p>\n

But the crisis has revived speculation that SocGen will become a takeover target.<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

This is the main reason why the world markets went down last Monday The rogue trader who cost SocGen \u20ac5bn By FT Reporters Published: January 24 2008 07:19 | Last updated: January 25 2008 02:24 A lone rogue trader was on Thursday night being blamed for the biggest fraud in investment banking history after Soci\u00e9t\u00e9 […]<\/p>\n","protected":false},"author":79,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-18322","post","type-post","status-publish","format-standard","hentry","category-7"],"_links":{"self":[{"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/posts\/18322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/users\/79"}],"replies":[{"embeddable":true,"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/comments?post=18322"}],"version-history":[{"count":0,"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/posts\/18322\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/media?parent=18322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/categories?post=18322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.satfrequencies.com\/invest\/wp-json\/wp\/v2\/tags?post=18322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}