The news about a massive securities fraud by a rogue trader at France’s second largest bank, Société Générale, just keeps getting worse. The Financial Times reported on Tuesday that the bank didn’t lose the $4.9 billion euros that it first reported, but will actually report losses of over $6 billion euros after unwinding the unhedged bets by the rogue trader, Jérôme Kerviel. In what may be one of the great understatements of the year, CEO Daniel Bouton stated that the internal audit system of the bank’s risk management is insufficient to prevent this type of fraud.
President Sarkozy of France, who has been in the papers more than Britney Spears lately on affairs both private and public, has made it clear that he wants heads to roll. But who should ultimately be accountable for the biggest scandal to hit the financial markets since the downfall of Barings bank in 1995? There seems to be three upfront players in this blame game and all three seem to have played a little fast and loose with the numbers.