Paris: Societe Generale SA said trader Jerome Kerviel built up positions in European stock index futures of 50 billion euros ($73 billion) before the French bank discovered the trades and unwound them.
 
Kerviel, 31, took advantage of the bank’s practice of checking only net trading positions rather than gross bets to conceal his subterfuge with phony hedges, SocGen said. The €4.9 bn trading loss was the biggest in banking history.

“One of the first lessons to put in place is that we will do systematic controls on the nominal value, even if it doesn’t show up as market risk,” Jean-Pierre Mustier, CEO of SocGen’s corporate and investment bank, said.

The positions Kerviel amassed were larger than the company’s market value, now €33 billion.
Kerviel, who the bank said hacked into computers and faked documents to hide his trades, exploited other weaknesses too.

He took only four days off last August and postponed a vacation at the end of the year. Banks make trading staff take time off so concealed positions can become evident.

“There was clearly a fault in the bank’s control systems,” said Jean Peyrelevade, a former CEO of Credit Lyonnais and board member of Barings when Nick Leeson’s losses brought it down.

Source : Dna