SocGen blames single trader after $607 million rate-rigging fine

December 4, 2013 05:21 AM

Societe Generale SA, France’s second- biggest bank, placed sole blame on an ex-trader it didn’t identify for interest-rate rigging that cost it 446 million euros ($607 million) in European antitrust fines.

“The events essentially relate to inappropriate conduct by one employee who left Societe Generale in September 2009,” the Paris-based bank said in a written statement today. “All these actions were carried out without the knowledge of his supervisors or the bank’s management.”

Societe Generale was among six companies fined a record 1.7 billion euros by the European Commission for rigging benchmark interest rates. Societe Generale’s fine for colluding to fix rates linked to Libor was the second-largest after Deutsche Bank AG’s 725 million euros.

The bank’s shares dropped as much as 2.4% in Paris trading. The stock fell 0.3% to 40.66 euros at 4:56 p.m., valuing the company at 32.5 billion euros.

The trader “was not the initial instigator of these manipulation attempts” and “mostly responded to requests from an operator working at another bank,” Societe Generale said. It found “some attempts to manipulate the Euribor rate” from March 2006 to May 2008, it said, based on an almost two-year long internal investigation.

Unauthorized Trades

Societe Generale set aside 700 million euros of provisions at the end of September for litigation. Today’s fine “does not affect the group’s financial objectives for 2013,” it said.

The bank said it improved its controls since 2008.

It’s not the first time Societe Generale blamed a single person for such wrongdoing. Five years ago, it enhanced risk controls after uncovering a 4.9 billion-euro loss caused by unauthorized trades by ex-trader Jerome Kerviel.

Kerviel, 36, lost an appeal last year to reverse a 2010 court verdict holding him solely responsible for the trading loss. Kerviel, who specialized in European stock index futures, was called a “terrorist” by then Chief Executive Officer Daniel Bouton.

Societe Generale got a 4 million-euro fine from the French banking regulator in 2008 after Kerviel hid billions of euros of trades. There were “serious shortcomings” in internal controls, the watchdog said.

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