Risk management : Societe Generale

Résumé du document

In order to better understand this study, I think that we have first to explain what happened in the French Bank crisis, and who its actors were. This major crisis was made public on 24th January 2008. On this date, the CEO of the French bank, Daniel Bouton, announced a loss of about 7.1 billion, mainly due to one person. If we trust the official announcement, the trader Jérome Kerviel (about 5 billion due to him and about 2.1 due to the subprime crisis) was responsible for it. The investigation about this case is still not complete, but if we assume that the figures given by the CEO are true, it is the most significant loss caused by a trader in the history of the French bank. But how could only one trader generate an important loss for a group like Société Générale? When the bank discovered these operations of the trader (the 19th January 2008), around 50 billion were submitted to the variation of the market, resulting, in financial terms in an open situation.

Extraits

[...] And for bank, this risk management is becoming more and more important due to the instability of the international financial market. But even if it is becoming so important, some crisis can occurred, like for example the crisis of January 2008 at the Société Générale, where the trader Jérome Kerviel make a loss of approximately 7 billion for the bank. Within the framework of this assignment, we will try to see what happened, and what might have be done or improved. [...]

[...] Moreover, the French bank has subscribed to a bank of compensation for its investment: Clearnet S.A, which is another control company, and which has as a mission to supervise and control the activities of the bank on the financial French market. As we can see, all the actors of this crisis were supposed to control everything at their respective level, and were managing the potential risk apparently in a good way. III. Why the crisis? If this risk management was apparently so we can ask the following question: why a crisis like that happened? Studying this crisis, we can see that everything was not as perfect as it appear. [...]

[...] This trader has made many actions that have influenced the crisis. But concerning these actions that have leaded the bank to the crisis, we have several versions. From his part, the trader said that his hierarchy was aware about what he was doing, and gave its approval. But from another hand, the board of directors of the bank, by the way of the CEO, said that Jérome Kerviel had made this by his own, without giving information or asking approval from the hierarchy. [...]

[...] First, we have to explain how this situation has occurred and how only one man could make such huge loss for his group. As we said, J. Kerviel was a trader for the French Bank Société Générale, and was trading for his bank, buying and selling portfolios in order to make money. Generally, when a trader buys a portfolio, he sells another one with similar characteristic and makes a benefit on this trade. But in this case, it exist a little problem. [...]

[...] In this cases, a lot of biases and errors have produce the first real bank crisis in France, and we have seen that maybe a better control and a better communication could have avoided this entire crisis. So in order to improve its risk management department (that have not been as efficient as it should the bank Société Générale have to improve several point in its process of risk and in its process of control. Nowadays, we have to expect that the bank have learned what to do with this terrible loss and crisis. [...]