From Dealbook (and everywhere else)
The French bank Societe Generale said Thursday that it had uncovered an exceptional fraud by a trader that would cost it 4.9 billion ($7.1 billion) and that it would seek new capital of about $8 billion.
The company, the second-largest listed bank in France, said in a statement that the fraud had been committed by a trader in charge of "plain vanilla" hedging on European index futures.
The trader, who was not identified, "had taken massive fraudulent directional positions in 2007 and 2008 far beyond his limited authority," the bank said.
"Aided by his in-depth knowledge of the control procedures resulting from his former employment in the middle-office, he managed to conceal these positions through a scheme of elaborate fictitious transactions."
The bank said the fraudulent positions had been closed and the trader suspended. The incident has been thoroughly investigated and found to be a case of "isolated fraud."
How is that possible with anything resembling a risk management system?