The red flags SocGen missed
TEXT OF STORY
Doug Krizner: Since the rogue trader scandal at Societe Generale, the French government’s been calling for tighter controls on banks. In a report this morning, the finance ministry identified serious flaws in risk management. From the European Desk, Stephen Beard has more.
Stephen Beard: Eleven days after the scandal broke, the French government has spelled out the lessons to be learned. It zooms in on three major problems at the bank.
First, that someone who had worked in the back office checking up on traders had then been given a job as a trader. Second, that the trading computer network was not secure. And thirdly, that there was not an effective system for spotting unusual transactions.
Sophie Pedder is the Economist magazine bureau chief in Paris. She says the report also criticizes the bank for missing a series of warning signals:
Sophie Pedder: For example, the very fact that this particular trader had hardly taken any holiday which should have had red warning lights flashing because he wasn’t ready to let anyone look at his books. A series of examples like that.
The report, however, praises SocGen for the way it sold off the trader’s unauthorized investments, and flatly denies that this action caused the big slide in European share prices.
In London, this is Stephen Beard for Marketplace.
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