societe general

7/31/2019 Societe General

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http://www.youtube.com/watch?v=4umCFROYkz
http://www.youtube.com/watch?v=4umCFROYkzEhttp://www.youtube.com/watch?v=4umCFROYkzE


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Socit Gnrale is one of the largest Europeanfinancial services groups

The Group combines financial solidity with a

strategy of sustainable growth


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Socit Gnrales teams offeradvice and services to individual,corporate and institutionalcustomers in three corebusinesses:

Retail banking in France with theSocit Gnrale branchnetwork.

International retail banking, witha presence in Central andEastern Europe and Russia, in theMediterranean basin, in Sub-Saharan Africa, in Asia and in theFrench Overseas Territories.


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Corporate andinvestment banking witha global expertise ininvestment banking,

financing and globalmarkets.

Also a significant playerin specialized financing

and insurance, privatebanking, assetmanagement andsecurities services


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TOPIC Q1 2012 Q1 2011

OPERATING INCOME EUR 2.0 billion EUR 2.2billion

NET INCOME EUR 732 million EUR 916million

Corporate and

Investment Banking

EUR 1,658 million

(-13.8%)

EUR 1,924

million

Specialized FinancialServices and Insurance

EUR 849 million (-3.3% )

EUR 877million

Global InvestmentManagement and

EUR 553 million (-6.5%)

EUR 589million

OPERATING EXPENSES EUR 4,333 million(-0.8%)

EUR 4,368million

ACOUNT TAX 27.4% 27.1%


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1864 - 1893 Birth of a universalbank

1894 - 1914 The era of expansion

1914 - 1945 Operating in a world incrisis


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1945-1972 The "Guardian Angel"Bank

1973-1997 Modern times... testingtimes

1998-2009 On course for the 21st

century


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Education: Master of Finance, University of Lyon

Starting position: Risk management office, back officesystems and security systems

Ending position: Lower-level trader, Delta One- Tradeindex futures as a way to hedge company risk and

make small profits

Co-workers impressions: quiet and unassumingtrader, unimpressive education background,

motive to impress his seniors


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Job role: Purchase European stock index futures and sellothers as a

hedge

Job goal: Create small, low-risk profit stream based onlarge volume

What Kerviel actually did: Bypassed all internal controlsand made high risk unauthorized trades for a total of 50

billions euros in trades.

He bypassed controls by creating fictitious trades in atrading book to offset his trades.

How did he bypass controls:

-Learned internal controls in starting position in back office

- Exactly knew the internal checking schedule and removedall false transactions in the books minutes before check


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FridayJan 18

Sunday

Jan 20

MondayJan 21

Wednesday

Jan 23

ThursdayJan 24

Abnormaltradingdetected

PositionsIdentified

-Inform Gov of

Banque deFrance

- Postpone allcommunication

Unwinding

Begins- Unfavorable

marketconditions

UnwindingComplete

- Board Convenes

PublicDisclosure


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System vulnerabilities

Security policies

IT controls including:- General controls- Application controls


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Management|Organization|Technology

Unauthorized AccessInternal Control Breach

Managers failure to identify key error


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Kerviels ethical misconduct

Failure of internal controls

Management and Supervisors

IT Audit Controls


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There was definitely an ethical violation

Internal controls should have been stronger

The leader of Socit Gnrale should havemanaged the issue better

Management and colleagues were complicit


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What motivated Kerviel?

Were co-workers aware of his activities?

How could management not have known what Kerviel wasdoing? Did they look they other way for the sake of profits?

Was there a culture of risk taking?

How the compliance departement not have flaggedKerviels positions?

What ethical obligations does a company have to disclosethis type of incident?


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http://www.youtube.com/embed/gNa8329ilyQ
http://www.youtube.com/embed/gNa8329ilyQhttp://www.youtube.com/embed/gNa8329ilyQ


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The campaign: authentic?

The idea: nave?

The reality: difficult industry

The conclusion: culture shown through the

reaction after 2008


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