HOLD UP TO SOCIETE GENERALE: Wind that shakes PANIC THE THIRD FRENCH BANK
While storms and hurricanes of the subprime crisis continues to ravage across the U.S. , Europe and Asia, yet another earthquake has just shaken the general society. We learn from yesterday (January 24, 2008) that Société Générale has been victim of a fraud concealed one of his Golden Boys (broker) in the person of Jerome Kerviel (trained at the University of Lyon 2 Master Finance). Kerviel, according to the statements of General Management, is a broker for 31 years which enters the box (Bank) in 2000. He worked for 5 years in the oversight board of the Bank (Back Office) before being assigned to the trading floor - a body which sells the securities and the Bank. Our intention here is not of intent to sue broker out to this young pair but wonder about the effectiveness of the charge that he has been subjected in recent days.
The company claims to have recorded an overall loss for impairment of assets caused by the crisis removes about 2 billion euros, it added the 4.9 billion loss on fraud orchestrated by broker (Jerome Kerviel) for almost a year. While most experts agree that it is unlikely he could act alone (at least there's one or accomplices). The real question is wonder how it would be possible for a single senior broker (which barely touches EUR 100000 a year with commission) it happens to conceal an astronomical sum of around EUR 50 billion through the creation of a fictional company in a large bank like Société Générale. As a young professional and talented computer that has already spent 5 years in the oversight board of the Bank, the young broker could foil the workings of the Bank's control. But a problem arises, actually Jerome Kerviel committed an astronomical sum of around EUR 50 billion matured on January 19 last. Discovering fraud, Societe Generale officials have decided to liquidate all the transactions related to this commitment by selling those shares. And that's the problem, since it falls ill in a context marked by the subprime crisis that is ravaging everywhere, mistrust is the norm, then it is normal to sell loss. And that's what happens, Soc Gen was forced to sell shares that were worth 50 billion euros (a sum that exceeds the fund's own Bank! ") At a price of 45 billion Euros in a gloomy atmosphere of financial market and banking sector. Note that if she (Societe Generale) sold the shares in a context of market stability The Bank could have earned capital gains of around 5 billion euros or even more than .5 billion Euros, it's almost the annual income of Societe Generale, almost half the budget of education higher in France (12 billion euros in 2008), 1 / 8 budget deficit of France in 2008 (43 billion euros), so this is money that can do something. Woe then to very talented young broker who obviously lack professional rigor (it has not enriched say about this manipulation just happy to thwart and circumvent the control system Bank). As we have seen, control systems and security system of the big banks are not infallible then. There are still some flaws somewhere. It is the business of the wealthy said one side of the poor and that is true. Remember that the small customers of the Bank will have nothing to fear because of this panic. In France under the 1999 law, bank deposits are insured up to EUR 70000 and in case of force majeure, the Bank of France is here to save the day.
Whatever one may say, we know that these dealers (Golden Boys) have been trained and refer regularly to the theory of portfolio choice of Harry Markowitz (Nobel Prize in economics 1990). This theory states that the choice of a security depends less on fundamental analysis of the issuer that the structure of the portfolio the buyer. One theory as such, it is not infallible, especially in the world of modern finance, where uncertainty is appropriate (this treaty probability of Keynes is still relevant). It's no wonder we have witnessed the suicides at the Golden Boys or Managers of Hedge Funds (investissurs institutional-investment funds) when things go wrong. It is hoped that the young broker is not going to pass something tragic like that.
is an occupational hazard, it is true that Societe Generale will release only 600 or 700 million euros in profits in fiscal 2007 instead of $ 5 billion and more than she was used to grab. A major concern of leaders of the Bank (Societe Generale) is to be acquired by another. The rescue plan for capital increase of around 5, 5 billion euros mentioned yesterday (Thursday, January 24, 2008) shows indeed that it holds up, up proven otherwise. In the world of finance, the theory of Lavoisier: "Nothing is lost, nothing is created, everything changes" is almost verified. The loss of 7 billion Euros Bank Societe Generale and those 300 billion dollars (214 billion euros, while France's budget is estimated at 276 billion euros in 2008) at the global level because of the subprime crisis 5 (and which continue to ravage) does not disappear, this sum has just changed portfolios. It is the law on the subject: "it takes a winner, there must be a loser in life everyday.
While we wait next earthquake in the financial market and banking sector. Who's next? This is not Africa or Madagascar, but in Europe, the United States - USA and Asia. As usual, Africa remains a spectator of the financial world changing yet remaining the GREAT case!! WHICH MAY BECOME A LITTLE OR DISAPPEAR IN ONE.
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