Société Générale (SocGen) has uncovered a fraud committed by one of its traders which will have a €4.9 billion (£3.7 billion) negative impact on the group, France’s second-largest listed bank announced this morning.
The Paris-based trader, responsible for plain vanilla futures hedging on European equity market indices, had taken 'massive fraudulent directional positions in 2007 and 2008 beyond his limited authority,' according to a corporate statement released today.
'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,' continues the statement.
The futures trader - described as an 'imprudent employee in the corporate and investment banking division' - has been fired, according to Daniel Bouton, chairman, SocGen. The firm will take legal action against him.
SocGen has also dismissed the trader's managers and executive managers.
The firm says its board has rejected an offer by chairman and CEO Daniel Bouton to resign.
The bank also announced further write-downs of €2.05 billion related to the global credit crunch and says it will raise €5.5 billion through a capital increase to strengthen its balance sheet.
The fraud echoes a similar blow last year to France's biggest retail bank, Credit Agricole, which in September announced a €250 million charge related to an unauthorised trading position.