French bank body fines SocGen $6 million over Kerviel
PARIS (Reuters) - France's Banking Commission on Friday fined Societe Generale 4 million euros ($6.3 million) for serious breaches in internal controls revealed by the French bank's 4.9 billion euro rogue trading loss.
In a decision e-mailed to Reuters, the Banking Commission also reprimanded France's second-biggest listed bank for poor supervision that led to the unauthorized trades by Jerome Kerviel, the former SocGen trader blamed for the losses earlier this year.
The Commission said SocGen's monitoring staff were insufficiently sensitive to fraud issues, and that the bank's IT systems security presented "significant weaknesses".
It also pointed to the absence of limits to Kerviel's gross trading positions, but added that SocGen had been quick to implement efforts to correct these weaknesses once they were revealed.
Societe Generale declined to comment.
The Kerviel scandal led to executive chairman Daniel Bouton splitting his job and transferring his chief executive position to Frederic Oudea, while Jean-Pierre Mustier, the head of the investment banking unit, was replaced.
Kerviel was freed from prison in March after an appeal against his detention, but he remains under formal investigation for breach of trust, computer abuse and falsification. He has said the bank must have been aware of his trading activities.
SocGen has published two internal reports on its own investigations into how Kerviel managed to bypass risk controls to build up a trading position worth 49 billion euros -- more than SocGen's own stock market value.
Its second report published in March blamed weak supervision and poor control systems for the trading scandal. It painted a climate in which managers turned a blind eye to risks.
SocGen did not discover Kerviel's unauthorized trades until January 18, even though the bank's internal reports showed that Kerviel had in 2007 raised alarms with derivatives exchange Eurex and been the subject of more than 70 "alert" warnings.
The losses from the Kerviel scandal made SocGen vulnerable to a takeover bid from rivals such as BNP Paribas and forced the bank to raise 5.5 billion euros in capital to shore up its finances, also weakened by subprime losses.
(Reporting by Marie Maitre and Swaha Pattanaik, Editing by Sudip Kar Gupta and David Cowell)
